<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Advanced Technology Laboratories, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[x] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $125.00
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ADVANCED TECHNOLOGY LABORATORIES, INC. APPEARS HERE]
Advanced Technology Laboratories, Inc.
22100 Bothell-Everett Highway
P.O. Box 3003
Bothell, WA 98041-3003
April 3, 1995
Dear Shareholder:
You are cordially invited to attend the 1995 Annual General Meeting of
Shareholders of Advanced Technology Laboratories, Inc., at 9:30 a.m. on
Wednesday, May 10, 1995, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington 98101.
At the Annual General Meeting the shareholders will be asked to elect nine
directors, to consider and vote upon a proposal to reincorporate ATL in the
state of Washington, to amend the terms of grants of stock options to outside
directors under the Nonemployee Director Stock Option Plan, and to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company
for 1995.
The Board of Directors unanimously recommends that shareholders vote FOR the
election of the nominated directors, FOR the reincorporation proposal, FOR the
amendment to the Nonemployee Director Stock Option Plan, and FOR the
ratification of the appointment of KPMG Peat Marwick LLP.
The Notice of Meeting and Proxy Statement on the following pages describe the
matters to be presented at the meeting.
Whether or not you plan to attend the meeting, we hope you will have your
stock represented by signing, dating and returning your proxy in the enclosed
envelope as soon as possible. Your stock will be voted in accordance with the
instructions you have given in your proxy. You may, of course, attend the
Annual General Meeting and vote in person even if you have previously returned
your proxy card.
Sincerely,
/s/ Dennis C. Fill
Dennis C. Fill
Chairman and
Chief Executive Officer
IMPORTANT
A Proxy Statement and proxy are submitted herewith. All shareholders are
urged to complete and mail the proxy promptly. The enclosed envelope for
return of the proxy requires no postage. Any shareholder attending the
meeting may personally vote on all matters which are considered, in which
event the signed proxy is revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED.
<PAGE>
[LOGO OF ADVANCED TECHNOLOGY LABORATORIES, INC. APPEARS HERE]
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 10, 1995
To the Shareholder:
The Annual General Meeting of Shareholders of Advanced Technology
Laboratories, Inc. ("ATL" or the "Company"), will be held at 9:30 a.m. on
Wednesday, May 10, 1995, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington 98101, for the following purposes:
1. To elect nine Directors to hold office until the next Annual General
Meeting of Shareholders and until their respective successors are
elected and qualified;
2. To consider and vote upon a proposal to change the Company's state of
incorporation from Delaware to Washington by way of a merger into a to-
be-formed wholly-owned Washington subsidiary;
3. To consider and vote upon a proposal to amend the Nonemployee Director
Stock Option Plan to increase the annual option grant of ATL common
stock for Nonemployee Directors to 5,000 shares;
4. To ratify the appointment of KPMG Peat Marwick LLP as its independent
auditors for 1995; and
5. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed March 20, 1995 as the record date for the
determination of shareholders entitled to receive notice of and to vote at the
Annual General Meeting or any adjournment thereof. Only shareholders of record
at the close of business on that date will be entitled to notice of and to vote
at the meeting.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON, BUT EVEN IF YOU
EXPECT TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID
ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION. SHARE-HOLDERS ATTENDING THE
MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE PREVIOUSLY SENT IN A PROXY.
By Order of the Board of Directors
/s/ W. Brinton Yorks, Jr.
W. Brinton Yorks, Jr.
Secretary
Bothell, Washington
April 3, 1995
<PAGE>
PROXY STATEMENT
ADVANCED TECHNOLOGY LABORATORIES, INC.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 10, 1995
GENERAL
The enclosed proxy is solicited by the Board of Directors of Advanced
Technology Laboratories, Inc. ("ATL" or the "Company"), for use at the Annual
General Meeting of Shareholders (the "Annual Meeting") to be held at 9:30 a.m.
on Wednesday, May 10, 1995, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington 98101, and at any adjournment thereof.
The address of the principal executive offices of ATL is 22100 Bothell
Everett Highway, P.O. Box 3003, Bothell, WA 98041-3003.
This Proxy Statement and the accompanying proxy are being mailed to the
shareholders of ATL on or about April 3, 1994.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of record of ATL's common stock, par value $0.01 per share (the
"Common Stock"), at the close of business on March 20, 1995, will be entitled
to vote at the Annual Meeting. On that date, the Company had outstanding
13,354,593 shares of Common Stock. Each share of Common Stock is entitled to
one vote at the Annual Meeting. The presence in person or by proxy of the
holders of record of one-third of the outstanding shares of Common Stock issued
and outstanding and entitled to vote is required to constitute a quorum for the
transaction of business at the meeting. Abstentions and broker non-votes will
be considered represented at the meeting for the purpose of determining a
quorum.
Under Delaware law and the Company's Certificate of Incorporation, if a
quorum is present at the meeting: (i) the nine nominees for election to the
Board of Directors who receive the greatest number of votes cast for the
election of Directors at the meeting by the shares present in person or
represented by proxy at the meeting and entitled to vote shall be elected
Directors, (ii) the proposed reincorporation must be approved by a majority of
the outstanding shares of the Company entitled to vote thereon, and (iii) each
of the other matters listed in the accompanying Notice of Annual General
Meeting of Shareholders must be approved by the affirmative vote of a majority
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the matter. In the election of Directors, any action other
than a vote for a nominee will have the practical effect of voting against the
nominee. Abstention from voting will have the practical effect of voting
against any of the other matters since it is one less vote for approval. Broker
nonvotes on one or more matters will have no impact on such matters since they
are not considered "shares present" for voting purposes.
PROXY VOTING
Shares for which proxies are properly executed and returned will be voted at
the meeting in accordance with the directions noted thereon, and in the absence
of directions to the contrary, such shares will be voted: "FOR" the election of
the nominees for the Board of Directors named in the following pages, "FOR" the
change of the Company's state of incorporation from Delaware to Washington,
"FOR" the proposal to amend the Nonemployee Director Stock Option Plan (the
"NED Plan") and "FOR" the ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors for the Company for 1995. It is not expected that
any matters other than those referred to in the Proxy Statement will be brought
before the Annual Meeting. If, however, other matters are properly presented,
the persons named as proxies will vote in accordance with their judgment with
respect to such matters. The grant of a proxy will also confer discretionary
authority on the persons named in the proxy to vote on matters incident to the
conduct of the Annual Meeting.
1
<PAGE>
REVOCATION
Any shareholder giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of the Company a written notice of revocation or
a duly executed proxy bearing a later date, or by attending the meeting and
electing to vote in person.
PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors has
fixed the number of directors constituting the Board at nine, each to hold
office for a term of one year and until his successor shall have been elected
and qualified. Kirby L. Cramer, Harvey Feigenbaum, Dennis C. Fill, Eugene A.
Larson, John R. Miller, Phillip N. Nudelman, David M. Perozek, Edward Ray and
Harry Woolf have been nominated for election to the Board of Directors for
1995. It is intended that votes will be cast pursuant to the accompanying proxy
for the election of these nominees, each of whom is at present a Director of
the Company, unless contrary instructions are received. If any nominee should
become unavailable for any reason, it is intended that votes will be cast for a
substitute nominee designated by the Board. The Board has no reason to believe
that the nominees named will be unable to serve if elected.
Biographical information regarding each of the nominees for the Board of
Directors is set forth below:
Kirby L. Cramer. Mr. Cramer (age 58) has served as a Director since February
26, 1993. Mr. Cramer serves as Chairman of the Compensation Committee and is a
member of the Audit Committee. Mr. Cramer is the Chairman Emeritus of Hazleton
Laboratories Corporation, a contract biological and chemical research
laboratory, which was acquired by Corning Incorporated in 1987. He is Chairman
of the Board of Northwestern Trust Company and also President of Keystone
Capital Company, an investment company. Mr. Cramer received his Bachelor of
Arts degree from Northwestern University and Master of Business Administration
degree from the University of Washington and is a graduate of the Harvard
Business School's Advanced Management Program. In 1988, he received an honorary
Doctor of Laws degree from James Madison University. Mr. Cramer is a member of
the University of Washington Foundation and also the Advisory Board of the
University of Washington Graduate School of Business Administration. He is the
past President and Trustee Emeritus of the Darden School Foundation of the
University of Virginia. Mr. Cramer is a member of the boards of directors of
Northwestern Trust Company, Immunex Corporation, Unilab Corporation, The
Commerce Bank of Washington, N.A., Landec Corporation, Unilab Group, Ltd. and
Olympic Boat Company.
Harvey Feigenbaum, M.D. Dr. Feigenbaum (age 61) has served as a Director
since January 2, 1987. He is Chairman of the Audit Committee and is a member of
ATL's Scientific Advisory Board. Dr. Feigenbaum has been a Distinguished
Professor of Medicine at the Indiana University Medical Center since 1980,
joining its faculty in 1962. He was elected to Phi Beta Kappa and received a
Bachelor's degree summa cum laude from Indiana University in 1955, an M.D. from
the Indiana School of Medicine in 1958, and his Cardiovascular Subspecialty,
American Board of Internal Medicine in 1969. Dr. Feigenbaum is a fellow of the
American College of Physicians, the American College of Cardiology, the Council
on Clinical Cardiology of the American Heart Association and the American
Institute of Ultrasound in Medicine, as well as a member of the Editorial
Boards of the American Heart Journal, the American Journal of Cardiology and
the journal Circulation. He is the editor of the Journal of the American
Society of Echocardiography. Dr. Feigenbaum is a director of Regentrief
Foundation for Delivery of Healthcare and SpaceLabs Medical, Inc.
Dennis C. Fill. Mr. Fill (age 65) has served as a Director, Chairman of the
Board and Chief Executive Officer of ATL and as a member of the Executive
Committee of ATL since November 11, 1986. From 1978 through mid-December 1986,
he served as a member of the board of directors of Squibb Corporation (the
former parent of ATL) and as its President and Chief Operating Officer. Mr.
Fill attended Ealing College, the Institute of Export and Borough Polytechnic.
He also served in the Royal Air Force. Mr. Fill is a member of the boards of
directors of Beckman Instruments, Inc., Morton International, Inc., SpaceLabs
Medical, Inc. and Cytran, Inc.
2
<PAGE>
Eugene A. Larson. Mr. Larson (age 52) has served as a Director and a member
of ATL's Scientific Advisory Board since December 22, 1992, as a member of the
Executive Committee since May 5, 1993, and is a member of the Audit Committee.
Mr. Larson previously served as a Director and President of ATL from June 1988
to January 1990. He has served as a consultant to ATL since January 1993. From
January 1991 to December 1992, he served as Executive Vice President of ATL.
Mr. Larson also served as a consultant to Westmark and ATL in 1987 and 1990,
and as ATL's Vice President, Technology from February 1988 to June 1988. He was
Professor of Entrepreneurship and Innovation, Department of Engineering,
Pennsylvania State University in 1986 and 1987. Mr. Larson was founder and
president of Echo Ultrasound, Inc., a manufacturer of medical ultrasound
devices, which was acquired by Johnson & Johnson in 1982. Previously he was
founder and President of Aerotech Laboratories, a manufacturer of industrial
ultrasound electronics, which was acquired by Smith Kline & French in 1970. He
has served as a director of Geisinger Medical Center and president and director
of Lewistown Hospital. In 1988, he was awarded the Pioneer in Ultrasound Award
by the American Institute of Ultrasound in Medicine.
John R. Miller. Mr. Miller (age 56) has served as a Director of ATL since
July 16, 1993 and is a member of the Compensation Committee. He is currently a
senior advisor to Chanen, Painter & Co., Ltd., an investment bank with offices
in Seattle, Washington. Mr. Miller is also a Senior Fellow of the Discovery
Institute for Public Policy and Chairman of the Cascadia Project in Seattle.
From 1985 to 1992, Mr. Miller served as a U.S. Congressman for the First
District of Washington State. While a Member of Congress, he served on the
Budget Committee and the Foreign Affairs Committee, including the Subcommittee
on International Economic Policy and Trade, International Operations. Mr.
Miller was a member of Phi Beta Kappa and received his Bachelor of Arts degree
from Bucknell University and a Doctor of Laws degree and Master of Economics
degree from Yale University Law and Graduate Schools, respectively.
Phillip M. Nudelman, Ph.D. Dr. Nudelman (age 59) has served as a Director of
ATL since October 28, 1994. He has served as Chief Executive Officer and
President of Group Health Cooperative of Puget Sound ("Group Health") since
February 1991. Dr. Nudelman joined Group Health in 1973 as Director of
Professional Services and has held positions of increasing responsibility since
then. He received his Bachelor of Science degree in Microbiology, Zoology and
Pharmacy from the University of Washington, and holds Master of Business
Administration and Doctor of Philosophy degrees in Health Systems Management
from Pacific Western University. Dr. Nudelman is a member of the American
Hospital Association House of Delegates, Regional Policy Board, and chairs the
Governing Council for Health Care Systems. Dr. Nudelman is a member of the
boards of directors of Cell Therapeutics, Inc., Cytran, Inc. and SpaceLabs
Medical, Inc. He also serves on the boards of directors of American Healthcare
Systems, Inc., the Association of Washington Business, and the Foundation for
Health Care Quality.
David M. Perozek. Mr. Perozek (age 52) has been President and Chief Operating
Officer of ATL since April 13, 1992. He became a Director of ATL on May 18,
1992. Prior to joining ATL, Mr. Perozek spent 17 years with the Medical
Products Group of the Hewlett-Packard Company. From February 1991 to March
1992, he served as a staff general manager of Hewlett-Packard's Medical
Products Group. From 1989 to February 1991, he served as general manager of
Hewlett-Packard's Apollo Systems division. From 1980 to 1989, Mr. Perozek
served as general manager of Hewlett-Packard's ultrasound business. Mr. Perozek
received his Bachelor of Science degree in Electrical Engineering from the
University of Detroit and both Masters of Science and Electrical Engineering
degrees from the Massachusetts Institute of Technology, and has completed the
Stanford Executive Management Program at Stanford University. He has served as
Chairman of the Ultrasound Section and as a member of the Diagnostic Imaging
and Therapy Systems Division of the National Electrical Manufacturers
Association (NEMA) and has served as chairman of NEMA's Ultrasound Section and
on the board of governors of the American Institute of Ultrasound Medicine.
Edward Ray. Mr. Ray (age 63) is President and Chief Operating Officer of
Interspec, Inc. ("Interspec"), a subsidiary of ATL. He became a Director of ATL
on May 16, 1994. Mr. Ray is co-founder of Interspec and served as President and
Chief Operating Officer and a Director of Interspec from 1979 until the merger
with ATL in 1994. Mr. Ray also served as Chairman of the Board of Interspec
from 1989 until the merger.
3
<PAGE>
For the five years prior to founding Interspec, Mr. Ray served as Vice
President and General Manager, and later President of Air Shields, Inc., a
subsidiary of Vickers plc. Prior to that time Mr. Ray was General Manager of
the Oceans Systems Department and Manager of the Space Nuclear Systems
Operations of the General Electric Company. Mr. Ray is a director of the Ben
Franklin Technology Center of Pennsylvania, of the Council of Growing
Companies, and of Robec, Inc.
Harry Woolf, Ph.D. Dr. Woolf (age 71) has served as a Director and a member
of the Compensation Committee of ATL since January 2, 1987. He has also served
as Chairman of ATL's Scientific Advisory Board since May 1, 1987. In 1987 Dr.
Woolf completed an 11-year appointment as the director of The Institute for
Advanced Study, Princeton, New Jersey, and is currently a Professor Emeritus at
the Institute. Dr. Woolf received his Bachelor of Science and Master of Arts
degrees from the University of Chicago and his Doctor of Philosophy degree from
Cornell University. He has also received honorary doctorates from Whitman
College, American University, Johns Hopkins University and St. Lawrence
University. Dr. Woolf has been honored by election to the Academie
Internationale d'Histoire des Sciences, American Philosophical Society, Sigma
Xi, Phi Beta Kappa and American Academy of Arts and Sciences. He was a Trustee
of the Rockefeller Foundation (1984-1994), and is a Trustee of Reed College.
Dr. Woolf is a member of the boards of directors of Alex. Brown Mutual Funds
and Merrill Lynch Open-End Investment Funds--Cluster C and SpaceLabs Medical,
Inc. He is also a director of the Johns Hopkins Program for International
Education on Gynecology and Obstetrics, Inc., and Family Health International.
During 1995, there were 9 meetings of the ATL Board. All incumbent directors
were in attendance at over 75% of such meetings.
DIRECTOR COMPENSATION
Directors who are employees of ATL do not receive any fee for their services
as Directors. Directors who are not employees of ATL are paid an annual
retainer of $25,000 and receive an additional fee of $500 for attendance at
each meeting of the ATL Board plus $500 for attendance at each meeting of a
committee of the ATL Board. A nonemployee Director serving as a committee
chairman receives an additional $1,000 per annum.
As approved by the shareholders on May 5, 1993, Directors who are not
employees of ATL are also eligible for a grant of stock options under the NED
Plan. Each nonemployee Director automatically receives annually, on the first
day of July, an option to purchase 2,000 shares of ATL Common Stock, at an
exercise price equal to the fair market value on the date of grant. In 1994,
Messrs. Cramer, Feigenbaum, Miller and Woolf were recipients of grants under
the NED Plan. Dr. Feigenbaum has made arrangements for any proceeds realized
from his ATL stock options to be donated to charity. All nonemployee Directors
currently proposed to serve as Directors are eligible for grants in 1995.
Subject to shareholder approval of the proposed amendment to the NED Plan, each
nonemployee Director will receive an option to purchase 5,000 shares of ATL
Common Stock each year. See "PROPOSAL 3--Amendment to Nonemployee Director
Stock Option Plan."
In 1994, Dr. Harvey Feigenbaum received $44,000 for consulting services
provided to Nova MicroSonics, a division of ATL located in Allendale, New
Jersey and $15,000 as a member of the Scientific Advisory Board.
In 1994, Mr. Larson received $223,500 for consulting services to the Company
and $48,000 for his services as a member of the Scientific Advisory Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1994, Dr. Harry Woolf received $60,000 in his capacity as Chairman of the
Scientific Advisory Board. Dr. Woolf is a member of the Compensation Committee
of the Board.
4
<PAGE>
COMMITTEES OF THE ATL BOARD
ATL has established standing committees of the ATL Board, including Audit,
Compensation and Executive Committees. In addition, Directors serving on the
Scientific Advisory Board participate in and direct the setting of ATL's
technology strategy. The Board of Directors does not have a standing nominating
committee. Each of the committees is responsible to the full ATL Board, and its
activities are therefore subject to approval of the ATL Board. The functions
performed by these committees can be summarized as follows:
Audit Committee. The Audit Committee reviews the accounting principles,
internal accounting controls, audit plan and financial results of ATL in order
to safeguard ATL's assets and to provide for the reliability of its financial
records. The members of this Committee are Dr. Feigenbaum (Chairman), Mr.
Cramer and Mr. Larson. The Audit Committee met 3 times during 1994. All members
were in attendance at all meetings.
Compensation Committee. The Compensation Committee establishes salaries,
incentives and other forms of compensation for directors, officers and other
executives of ATL and its subsidiaries. This Committee also administers ATL's
various incentive compensation and benefit plans and recommends the
establishment of policies relating to incentive compensation and benefit plans.
The members of this Committee are Mr. Cramer (Chairman), Mr. Miller and Dr.
Woolf. This Committee met 4 times during 1994. All members were in attendance
at all meetings.
Executive Committee. The Executive Committee has authority, subject to
limitations prescribed by the ATL Board, to exercise, during the intervals
between meetings of the ATL Board, the powers of the full ATL Board, and is
also available, on a standby basis, for use in an emergency or when scheduling
makes it impractical to bring the full ATL Board together for a meeting. The
members of this Committee are Mr. Fill, Dr. Feigenbaum, Mr. Cramer and Mr.
Larson. This Committee did not meet during 1994.
Scientific Advisory Board. The Scientific Advisory Board meets with a group
of senior scientists of ATL known as the Senior Technical Staff ("STS") and has
the authority to control and direct ATL's technology strategy. Regular meetings
of the STS are held weekly, and members of the Scientific Advisory Board attend
these meetings as circumstances dictate. The members of the Scientific Advisory
Board are Drs. Feigenbaum and Woolf, and Mr. Larson.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires ATL's officers and directors and persons who own more than 10% of a
registered class of ATL's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commissions (the "SEC").
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish ATL with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, ATL believes that during calendar year 1994 all
filing requirements applicable to its officers, directors and greater than 10%
shareholders were complied with, with the exception that Donald D. Blem was
five days late in filing a Form 4 disclosure of the sale of 2,250 shares of ATL
Common Stock for the month of July, 1994.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 28, 1995 known by
the Company with respect to each shareholder to be the beneficial owner of more
than five percent of any class of voting securities of the Company, each
Director and certain Named Executive Officers as described in the Summary
Compensation Table and all Directors and executive officers of the Company as a
group. Each of the named
5
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persons and members of the group has sole voting and investment power with
respect to the shares shown, except as stated below. As of February 28, 1995
there were 13,353,294 shares of Common Stock issued and outstanding.
BENEFICIAL OWNERSHIP OF SHARES
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------------------ ------------ --------
<S> <C> <C>
5% OWNERS
FMR Corp./ Fidelity Management & Research
Company ("Fidelity").......................... 1,668,500(2) 12.5%
82 Devonshire Street
Boston, MA 02109
The State of Wisconsin Investment Board........ 940,000(3) 7%
P.O. Box 7842
Madison, WI 53707
Trimark Investment Management Inc.............. 769,800(4) 5.8%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5
Wellington Management Company.................. 767,700(5) 5.7%
75 State Street
Boston, MA 02109
DIRECTORS AND EXECUTIVE OFFICERS
Dennis C. Fill................................. 298,170(6) 2.2%
David M. Perozek............................... 120,727(6) *
Edward Ray..................................... 103,975(7) *
Harvey N. Gillis............................... 40,216(6) *
Eugene A. Larson............................... 38,100(6) *
Castor F. Diaz................................. 22,225(6) *
Kirby L. Cramer................................ 12,000 *
Harry Woolf.................................... 8,000 *
Harvey Feigenbaum.............................. 2,463(8) *
John R. Miller................................. 300 *
Phillip N. Nudelman............................ 100 *
All Directors and Executive Officers as a Group
(15 Persons).................................. 723,430(1)(5) 5.4%
</TABLE>
- --------
*Under one percent.
(1) Includes Director and executive officer stock options exercisable within 60
days of February 28, 1995.
(2) In a joint filing, FMR Corp. and Edward C. Johnson 3d, Chairman of FMR
Corp., through their control of Fidelity, each have sole power to vote and
sole power to dispose of 1,190,700 shares, and through Fidelity American
Special Situations Trust and its subsidiary Fidelity International Limited
each have sole power to vote and sole power to dispose of 12,700 shares,
and through Fidelity Management Trust Company has sole power to direct
voting of 452,200 shares, no power to vote 12,900 shares, and sole power to
dispose of 465,100 shares as investment manager for institutional accounts,
based upon publicly available information reported as of December 31, 1994.
(3) Sole power to vote and sole power to dispose of 940,000 shares, based upon
publicly available information reported as of December 31, 1994.
(4) Sole power to vote and sole power to dispose of 769,800 shares, based upon
publicly available information reported as of December 31, 1994.
(5) Shared power to vote 85,850 and sole power to dispose of 767,700 shares,
based upon publicly available information reported as of December 31, 1994.
(6) Includes shares held by the Trustee of ATL's Incentive Savings and Stock
Ownership Plan (the "ISSOP/401(k)") for each such executive officer and/or
Director who is a participant in the ISSOP/401(k). Does not include shares
purchased by the Trustee of the ISSOP/401(k) after December 31, 1994, which
shares have not yet been allocated by such trustee to each of the
beneficiaries.
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(7) Includes 4,264 shares owned by Mr. Ray's wife. Mr. Ray disclaims beneficial
ownership as to all such shares.
(8) Includes 163 shares owned by Dr. Feigenbaum's wife. Dr. Feigenbaum
disclaims beneficial ownership as to all such shares.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation for the
fiscal years 1994, 1993 and 1992 for services in all capacities to the Company
and its subsidiaries by persons who, at December 31, 1994 were the Chief
Executive Officer and the Company's four most highly compensated executive
officers of the Company, other than the Chief Executive Officer (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
--------------------- -----------------------------------
NUMBER OF
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING COMPEN-
NAME AND SALARY BONUS(1) AWARDS(2)(3) OPTIONS SATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
------------------ ---- ------ -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill 1994 428,746 112,000 815,130 0 8,925
Chairman and Chief 1993 370,107 236,120 328,880 75,000 3,935
Executive Officer 1992 442,083 427,678 581,875 75,000 3,818
Edward Ray 1994 300,400 140,000 375,000 100,000 37,775
President and Chief 1993 269,240 139,000 0 24,780(5) 818
Operating Officer,
Interspec 1992 254,231 139,000 0 0 818
David M. Perozek 1994 289,807 48,000 24,960 0 4,815
President and Chief 1993 266,538 100,040 204,960 40,000 3,489
Operating Officer, ATL 1992 190,384 614,271(6) 581,175 115,000 0
Harvey N. Gillis 1994 215,096 36,000 18,880 20,000 4,245
Sr. Vice President and
Chief 1993 193,846 76,120 90,000 25,000 1,090
Financial Officer 1992 48,461 82,838(7) 234,375 25,000 0
Castor F. Diaz 1994 187,771 25,000 12,800 8,000 77,476(8)
Sr. Vice President, Worldwide 1993 162,451 52,200 12,800 17,000 52,432(9)
Sales and Marketing 1992 161,886 69,622 116,375 9,000 97,849(10)
</TABLE>
- --------
(1) Includes bonus awards earned during the fiscal year covered under the
Company's Management Incentive Compensation Plan (the "MIC Plan"). See
"Compensation Committee Report on Executive Compensation."
(2) Restricted stock awards generally have a vesting period of four years with
25% of the award amount vesting each year on the anniversary date of the
award. The rights of a restricted shareholder include the right to receive
any dividends or other distributions made or paid with respect to such
shares. The amounts reported in this table represent the market value of
the shares at the date of grant based upon the closing price of the Common
Stock reported on the Nasdaq National Market on such date. At December 31,
1994 Messrs. Fill, Ray, Perozek, Gillis and Diaz held 82,430, 25,000,
26,560, 12,430 and 4,300 shares of restricted stock, respectively, having a
market value of $1,524,955, $462,250, $491,360, $229,955 and $79,550,
respectively, based upon the closing price of the Common Stock reported on
the Nasdaq National Market on December 30, 1994.
(3) Includes bonus awards of restricted stock on February 18, 1994, which
represent 20% of the cash value of an award under the MIC Plan for the
fiscal year 1993. Under these MIC Plan awards, Messrs. Fill, Perozek,
Gillis, and Diaz received 3,680, 1,560, 1,180 and 800 shares, respectively,
having a market value of $58,880, $24,960, $18,880 and $12,800,
respectively. The restricted shares granted have a two-year vesting period
with 50% of the award amount vesting each year on the anniversary date of
the award.
7
<PAGE>
(4) Includes employer-matching contributions made to the ISSOP/401(k) Plan or
the former Interspec 401(k) plan.
(5) Represents the conversion of 60,000 shares in Interspec stock options
granted under prior Interspec stock option plans pursuant to the merger
between ATL and Interspec on May 17, 1994.
(6) Mr. Perozek joined ATL on April 13, 1992. This amount represents a $480,000
bonus paid under his employment agreement when Mr. Perozek became President
of ATL in April 1992 and $134,271 as a 1992 bonus under the MIC Plan.
(7) Mr. Gillis joined ATL on September 24, 1992. This amount represents a
$53,000 bonus paid upon employment and $29,838 as a 1992 bonus under the
MIC Plan. Mr. Gillis was guaranteed a $50,000 bonus for his initial 12
months with ATL under its offer of employment of August 28, 1992.
(8) Includes $32,563 in expatriate benefits and $22,323 in housing allowance.
(9) Includes $31,914 in expatriate benefits and $13,869 in automobile
allowance.
(10) Includes $33,356 in expatriate benefits and $63,086 in relocation
expenses.
OPTION/SAR GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1994 to the Named Executive Officers.
No SARs were granted in fiscal 1994.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- -------------------------------------------------------------------------------- -------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR(1) ($/SH) DATE 5% ($) 10% ($)
- ---- ------------------ ---------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill.......... 0 0 0 0 0 0
Edward Ray.............. 100,000 22.9% 15.00 5/17/04 $943,500 $2,391,000
David M. Perozek........ 0 0 0 0 0 0
Harvey N. Gillis........ 20,000 4.6 15.50 5/5/04 194,990 494,140
Castor F. Diaz.......... 8,000 1.8 15.50 5/5/04 77,996 197,656
</TABLE>
- --------
(1) Options granted under the Amended 1992 Option, Stock Appreciation Right,
Restricted Stock, Stock Grant and Performance Unit Plan (the "ATL Option
Plan") are granted at the fair market value on the date of grant and
generally vest over four years with 25% of each grant exercisable on the
successive anniversary date of grant. Certain changes in control of ATL
including certain changes in Board membership, Common Stock ownership by a
single entity, merger or liquidation, can trigger accelerated vesting of
stock options and rights to related payments.
(2) The dollar amounts under these columns are the result of calculations at
assumed rates of 5% and 10% and are not intended to forecast future
appreciation. No value will be realized if the stock price does not exceed
the exercise price of the options.
(3) The appreciation realized by all ATL shareholders on all 13,330,230 shares
of ATL Common Stock outstanding on December 31, 1994, starting from a base
value of $15.15 per share, which represents the average grant price for
stock options granted under the ATL Option Plan during 1994, would be
$127,028,427 and $321,913,057 at assumed annual rates of stock price
appreciation of 5% and 10%, respectively.
8
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information as of December 31, 1994,
regarding options held by the Named Executive Officers. None of such
individuals exercised any options during the fiscal year ended December 31,
1994.
AGGREGATED FISCAL 1994 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME OPTIONS AT FY-END (#) FY-END ($)(1)
- ---- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dennis C. Fill.............. 152,500 97,500 $594,810 $123,525
Edward Ray.................. 18,585 106,195 203,189 417,729
David M. Perozek............ 67,500 87,500 91,875 106,875
Harvey N. Gillis............ 18,750 51,250 40,625 110,000
Castor F. Diaz.............. 8,750 25,250 15,875 54,750
</TABLE>
- --------
(1) This amount is the aggregate number of the outstanding options multiplied
by the difference between the closing price of the ATL Common Stock as
reported on the Nasdaq National Market on December 30, 1994, minus the
exercise price of such options.
LONG-TERM INCENTIVE AWARDS
The following table sets forth certain information regarding the Company's
Long-Term Incentive Plan awards granted in fiscal year 1994 to the Named
Executive Officers.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR OTHER UNDER NON-STOCK PRICE-BASED
NUMBER OF PERIOD PLANS(2)(3)
SHARES, UNITS UNTIL ---------------------------
OR OTHER MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ---- ------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Dennis C. Fill............ -- 1994-1996 0 $225,093 $450,183
Edward Ray................ -- 1994-1996 0 126,168 252,336
David M. Perozek.......... -- 1994-1996 0 121,718 243,347
Harvey N. Gillis.......... -- 1994-1996 0 90,340 180,680
Castor F. Diaz............ -- 1994-1996 0 64,134 128,268
</TABLE>
- --------
(1) Similar awards granted in 1993 are not expected to have value at maturity
on December 31, 1995. It is unlikely that the 1994 awards will have value
at maturity on December 31, 1996.
(2) No payouts will be made prior to the end of the maturation period on
December 31, 1996.
(3) Awards, which are payable in cash, are determined as a percentage (0% to
105%) of a recipient's base salary. In 1994, the base salaries of Messrs.
Fill, Ray, Perozek, Gillis and Diaz were $428,746, $300,400, $289,807,
$215,096 and $152,701, respectively. See "Compensation Committee Report on
Executive Compensation."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policies. The Compensation Committee has developed and directs a
comprehensive program of compensation policies that aligns the compensation of
all employees, including senior management, in accordance with goals and
objectives that are consistent with ATL's business strategies. These business
strategies are designed to enhance business financial performance and customer
satisfaction and are thereby aligned with the overall corporate objective of
enhancing shareholder value. ATL's compensation policies are designed to
attract and retain key employees, including executive officers, in competition
with other high-technology companies that endeavor to attract such employees.
Compensation
9
<PAGE>
for all management personnel is based upon corporate performance as measured by
the criteria discussed below, as well as individual performance as measured by
individually tailored sets of goals and objectives that are directed toward
achieving ATL's business strategies for the year.
The Compensation Committee regularly receives reports and briefings from
outside compensation consultants who advise the Compensation Committee on all
aspects of compensation, including base salaries, bonus awards and incentives,
including restricted stock, stock options and long-term incentive awards.
Incentive awards payable to those engaged in sales activities are based upon
performance as measured by objective standards.
Compensation Programs. The Compensation Committee and the ATL shareholders
have adopted incentive programs that reach all areas of ATL. Under the ATL
Option Plan and the MIC Plan, awards may be granted to any officer or manager
of ATL in the form of stock options, SARs, restricted stock, grants of stock,
performance units, and cash bonuses. Under the 1992 Nonofficer Employee Stock
Option Plan (the "NOE Plan"), stock option awards may be made under prescribed
circumstances to any employee who is not an officer of the Company. Under the
Long Term Incentive Plan, designated employees of ATL may earn incentive awards
over a period of years which are premised on objective measures of company
performance. In July, 1994 the Compensation Committee reviewed the criteria and
interaction of all of the Company's compensation plans and adopted a Profit
Sharing Plan in which all employees not participating in the Long Term
Incentive Plan are eligible for cash bonuses based upon their base salaries and
paid from an award pool established by objective criteria of return on sales.
All individual awards to executive officers under the above plans must be
reviewed and approved by the Compensation Committee. In addition, all employees
are eligible to participate in the ISSOP/401(k) Plan following the initial year
of employment with ATL.
Salaries. Base salaries for all employees are reviewed on an annual basis.
Salary increases generally are based on a subjective evaluation of the
employee's performance by the employee's manager. Base salary ranges are set
using the results of surveys of similar positions in high technology companies
and in other local companies as well as internal equity considerations.
Bonuses. Traditionally, a portion of ATL's total compensation is paid in the
form of bonuses. Annual bonuses for all managers, including executive officers,
may be awarded by the Compensation Committee from an award pool established
under the MIC Plan. The size of the award pool is based on ATL's corporate
performance measured by quantified factors of revenue and earnings, and by
strategic factors aligned with ATL's business plan for the year. In 1994
Interspec employees were included in the award pool and these factors resulted
in a pool that was 47% of the amount of the 1993 award pool. In previous years
the personnel eligible for awards did not include the Interspec personnel who
joined ATL in 1994. With Interspec personnel excluded, the 1994 award pool for
ATL personnel was 38% of the 1993 pool and 29% of the 1992 award pool.
Individual awards were made by the Compensation Committee in consideration of a
recipient's managerial level, the impact of the recipient's position on the
achievement of ATL's goals, and the recipient's individual performance as
measured by the corporate objectives set for the recipient and the
effectiveness of the recipient in achieving those objectives.
Executive Officers Equity Awards. From time to time the Compensation
Committee grants awards of restricted stock and stock options under the ATL
Option Plan and the NOE Plan. The objectives of these grants are to recognize,
reward and retain individuals in key positions who have exhibited high
performance and have high potential for advancement with ATL. Every
recommendation for an award is individually brought before the Compensation
Committee by management. In 1994 ATL shareholders approved an amendment to the
ATL Option Plan which limits the size of option awards which can be granted
under the Plan, thereby bringing the Plan under the deductibility provisions of
Section 162(m) of the Internal Revenue Code for performance based plans. ATL
shareholders also approved, in conjunction with the acquisition of Interspec,
an increase in the number of shares authorized for issuance under the ATL
Option Plan. This increase has been applied by the Compensation Committee for
the benefit of the Interspec employees, first, in
10
<PAGE>
conversion of Interspec options into ATL options to effect the Interspec
merger, and second in the grant of new options to key Interspec employees upon
joining ATL. There are at present no awards or contracts outstanding for SARs
or performance unit awards under the ATL Option Plan.
Compensation of Executive Officers. The total compensation program for
executive officers in 1994, including the Chief Executive Officer, was balanced
among base salary, an annual bonus, long term incentives, restricted stock and
stock option grants vesting over a four-year period. The Compensation Committee
considered the reports and advice of outside consultants in the area of
executive compensation in determining each element of compensation and each
individual's total incentive compensation.
Executive Base Salaries. In 1994 the Compensation Committee adopted the
recommendation of an outside compensation consulting firm and established a
salary structure based upon the 1993 Radford Associates Management Total
Compensation Report. Salary ranges were based upon the 50th and 75th percentile
data for comparable positions in high technology companies comparable to ATL.
The Compensation Committee adjusted executive officer salaries in line with the
new structure.
Executive Bonuses. Bonuses awarded for 1994 were determined in accordance
with the criteria of the MIC Plan award pool described above. With the
exception of two awards established by contracts with new employees, the
bonuses of executive officers were reduced to 35% of 1993 bonus award levels.
Long-Term Incentive Awards. The Compensation Committee stated the terms of
performance incentives for certain executive officers under the Long Term
Incentive Plan in 1994. These incentives are to be earned over a three-year
term as determined by predetermined objective criteria of corporate performance
and will not mature until the end of 1996, at which time they may or may not
have value. The long-term incentive for each recipient is premised on a
fraction of the recipient's base salary and is limited to a maximum percentage
of salary. Similar incentives from 1993 are not expected to have value when
they mature at the end of 1995.
Executive Equity Awards. Equity awards granted by the Compensation Committee
to executive officers were made in consideration of advice and recommendations
from outside compensation consultants as to levels of awards appropriate for
companies, particularly high-technology companies, that are similarly situated
to ATL. The companies considered by such compensation consultants included
some, but not all, of the companies included in the Peer Group Index used in
the stock performance graph below. Individual equity awards were based upon the
job responsibility of a recipient, past performance and present job
responsibilities, the importance of a recipient to ATL's future progress and
the recipient's prior award amounts. These awards all vest in equal annual
installments over a four-year period beginning one year after the grant date.
The Compensation Committee does not utilize individual targets for equity
awards but follows a philosophy of issuing equity grants as broadly throughout
ATL as is reasonable, with consideration given to the impact of particular
positions on ATL's future success. In granting individual equity awards for
executive officers, the Compensation Committee takes into account the long-term
incentives given to each of such officers and considers the equity and long-
term incentives in the aggregate. This aggregate view had the effect of
reducing equity awards for these individuals to levels below what might have
been considered in the absence of the long-term incentives.
Compensation of the Chief Executive Officer. The Board has known that it has
been Mr. Fill's intention to step down from his position of Chief Executive
Officer upon attaining the age of 65 in 1994. However, it was the Board's
desire to retain the services of Mr. Fill for a period of time during which a
number of ongoing objectives of the Company's business strategies are intended
to be completed. The Compensation Committee received recommendations from an
outside compensation consulting firm as to Mr. Fill's compensation and
incentives, and concluded an extension of Mr. Fill's employment with the
Company until no earlier than the end of 1996. Mr. Fill will continue to
receive a base salary, bonus, and employee benefits as determined by the
Compensation Committee during this period, and at the end of the period he will
receive 50,000 shares of restricted stock and continuation of his $300,000
Company life insurance policy after his retirement. The Compensation Committee
has retained the services of Mr. Fill as a consultant to the Company for five
years
11
<PAGE>
after his retirement at the rate of $375,000 per annum. In May 1994 Mr. Fill's
salary was adjusted to $450,000, in consideration of completion of the
Interspec merger, and consistent with the restructuring of executive salaries
described above. The Chief Executive Officer received a bonus of $112,000 for
1994. This compares with bonuses of $295,000 in 1993 and $427,678 in 1992. Mr.
Fill received no stock option awards in 1994.
Compensation Committee
Mr. Kirby L. Cramer, Chairman
Dr. Harry Woolf
Mr. John R. Miller
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The graph set forth below represents the five-year cumulative total return on
shares of ATL Common Stock, the S&P 500 Stock Index, and a Peer Group Industry
Index resulting from an initial assumed investment of $100 in each. The Peer
Group Industry Index is a representative grouping of 81 companies from SIC Code
3845--Electromedical & Electrotherapeutic Apparatus*--which had five years of
reportable stock performance and includes the reinvestment of both cash and
stock dividends. The graph has been prepared by an outside consulting firm to
ATL. The ATL cumulative return is computed as required by the rules of the SEC
to comprise the cumulative total return on Westmark common stock (including
both SpaceLabs Medical, Inc. and ATL subsidiaries) prior to June 26, 1992, and
to thereafter comprise the cumulative return of shares of ATL Common Stock with
a dividend reinvestment of the 1992 Distribution. By reason of this
computation, the separate value of shares of ATL Common Stock on a stand-alone
basis cannot be distinguished in the graph.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
ADVANCED TECHNOLOGY LABORATORIES, INC., S&P 500 STOCK INDEX AND PEER GROUP
INDUSTRY INDEX*
[GRAPH APPEARS HERE]
<CAPTION>
S&P PEER
Measurement period ------- ------- -------
(Fiscal year Covered) ATL Index Index
- --------------------- ------- ------- -------
<S> <C> <C> <C>
Measurement PT - 12/31/89 $ 100 $ 100 $ 100
FYE 12/31/90 $ 53.26 $ 96.88 $115.81
FYE 12/31/91 $115.22 $126.42 $221.96
FYE 12/31/92 $ 75.33 $136.08 $198.62
FYE 12/31/93 $ 72.11 $149.80 $172.28
FYE 12/31/94 $ 79.64 $151.78 $190.75
</TABLE>
*A list of the component companies in this Industry Index will be provided, at
no charge to shareholders, upon request.
Retirement Plan
The ATL Retirement Plan (the "Retirement Plan") was amended effective January
1, 1994, and provides that upon retirement a participant will receive a monthly
benefit equal to the greater of (i) 1.0% of the participant's final average
monthly earnings (earnings as defined in the Retirement Plan) multiplied by the
12
<PAGE>
participant's years of credited service earned before December 31, 1993 plus 1%
of participant's final average monthly earnings taking into account all periods
multiplied by credited service earned after December 31, 1993, or (ii) 1.0% of
participant's final average monthly earnings multiplied by the participant's
years of credited service, with the Company and its subsidiaries. The executive
officers participate in the same manner as other eligible employees in the
Retirement Plan, which pays to vested employees the estimated maximum annual
retirement benefits at age 65. A participant is vested upon the completion of
five years of service. Benefits are also provided to a participant's surviving
spouse in the event of the participant's death prior to retirement.
The following tabulation shows the estimated annual benefits of an employee,
assuming annual benefits to an employee for retirement on January 1, 1995 at
age 65 after selected periods of service under the ATL Retirement Plan (the
"Retirement Plan"), and including amounts to be paid pursuant to the ATL
Supplemental Benefit Plan (the "Supplemental Plan"), if applicable.
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR CREDITABLE
SERVICE
AVERAGE -----------------------------------------------
ANNUAL 5 15 20 25 30
ARNINGSE YEARS 10 YEARS YEARS YEARS YEARS YEARS
- -------- ----- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000....................... 5,000 10,000 15,000 20,000 25,000 30,000
200,000....................... 10,000 20,000 30,000 40,000 50,000 60,000
300,000....................... 15,000 30,000 45,000 60,000 75,000 90,000
400,000....................... 20,000 40,000 60,000 80,000 100,000 120,000
500,000....................... 25,000 50,000 75,000 100,000 125,000 150,000
600,000....................... 30,000 60,000 90,000 120,000 150,000 180,000
700,000....................... 35,000 70,000 105,000 140,000 175,000 210,000
800,000....................... 40,000 80,000 120,000 160,000 200,000 240,000
</TABLE>
Amounts shown in the above table will be reduced by the actuarial equivalent
value of amounts distributed from the Discretionary Contribution Plan, which
was terminated in 1989, but in no event will they be less than zero. Retirement
benefits are not offset for Social Security benefits. The Employee Retirement
Income Security Act of 1974, the Tax Equity and Fiscal Responsibility Act of
1982 and the Tax Reform Act of 1986 (the "Code") generally limit the amount of
annual pension which may be paid from a federal income tax qualified plan to
varying amounts (currently $120,000) and the annual earnings which may be taken
into account for purposes of calculation of benefits under a federal income tax
qualified plan (currently $150,000). The actual amounts paid under the
Retirement Plan will be limited to comply with such legislation.
As of December 31, 1994 the number of years of credited service under the
Retirement Plan for Messrs. Fill, Perozek, Gillis, Diaz and Ray were
approximately 8, 2, 2, 7 and 0, respectively. The 1994 earnings for purposes of
calculation of benefits under this Retirement Plan for Messrs. Fill, Perozek,
Gillis, Diaz and Ray are $653,746, $389,847, $291,216, $204,152 and $439,400,
respectively. Subject to the limitations imposed by the Code, as stated above,
1994 annual earnings in excess of $150,000 shall be disregarded.
The Supplemental Plan is an unfunded plan, not qualified for Federal income
tax purposes, which covers any employee whose benefit under the Retirement Plan
is limited by certain provisions of the Code. Based on earnings as defined in
the Retirement Plan, Messrs. Fill and Diaz would be eligible for benefits under
the Supplemental Plan. Mr. Ray is also eligible for Retirement Plan benefits in
excess of limits provided by the Code under the Interspec Supplemental
Executive Retirement Plan which provides for substantially the same benefit as
the Company's Supplemental Plan.
EMPLOYMENT AGREEMENTS
Messrs. Fill, Gillis and Perozek have each entered into a Change in Control
Employment Agreement with ATL that provides for continued employment terms
equivalent to those immediately prior to a Change of Control (as defined in the
ATL Option Plan) for the three years following a Change of Control. A lump-
13
<PAGE>
sum payment equal to three years of salary and bonus is immediately triggered
if, following a Change of Control, employment is terminated by (i) the employee
for "good cause" or during the 30-day window period one year after the Change
of Control or (ii) the employer "without cause." A Change of Control, with or
without termination of employment, also triggers an acceleration of vesting of
restricted stock and stock options and payment of the "spread" between the
exercise price of options and the fair market value of the underlying ATL
Common Stock. Mr. Fill's Change of Control Employment Agreement was amended in
1994 as described in the "Compensation Committee Report On Executive
Compensation--Compensation of the Chief Executive Officer."
Mr. Ray's Employment Agreement with ATL was adopted through operation of the
Interspec Merger Agreement on May 17, 1994 and terminates on April 14, 1997.
Under his Employment Agreement Mr. Ray is entitled to an annual base salary of
$300,000 and an annual bonus of not less than $140,000, as determined by the
Compensation Committee. Mr. Ray is also entitled to continue his participation
in Interspec's Supplemental Executive Retirement Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January, 1995 the Company entered into a lease with Station GP, Inc. for
the lease of warehouse space in the Ambler, Pennsylvania vicinity at the rental
rate of $8,450 per month, and subject to cancellation on four months notice.
Edward Ray, Director, is a 10% limited partner in this enterprise. The lease
was negotiated at arm's length by Station GP, Inc. and the Company's finance
and administration employees responsible for the Company's facilities, with no
involvement by Mr. Ray.
See also "Director Compensation " and "Compensation Committee Interlocks And
Insider Participation".
PROPOSAL 2: REINCORPORATION IN WASHINGTON
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the Company's state of incorporation from Delaware to Washington (the
"Reincorporation"). The Board of Directors has approved the Reincorporation,
which would be accomplished by merging the Company with and into a newly formed
Washington subsidiary, ATLI Washington Corporation ("ATLI"), formed expressly
for this purpose. Upon effectiveness of the merger, ATLI's name will be changed
to Advanced Technology Laboratories, Inc., the present name of the parent
corporation. The shareholders will be asked to approve the Reincorporation at
the Annual Meeting.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
The Board's recommendation to reincorporate in Washington is premised
principally upon the belief that Washington corporation law is now comparable
to that of Delaware in areas of significance to the Company, and that the
Company's franchise fees will be substantially less in Washington than in
Delaware. It is presently anticipated that the Company will realize a savings
of approximately $150,000 per year in such fees. The state of Washington is
also the location of the Company's world headquarters and the location of its
primary manufacturing, research and development efforts.
Under Squibb Corporation ("Squibb"), the former parent company of ATL, the
Company was originally incorporated as a Delaware corporation in 1983 and
served as the holding company for Squibb's high technology medical electronic
businesses under the name Westmark International Incorporated ("Westmark"). In
1987, Westmark was spun off by Squibb as a Delaware corporation rather than a
Washington corporation due to a concern that certain provisions of the former
Washington Business Corporation Act (the "WBCA"), including provisions relating
to limitations on director liabilities and indemnification of directors and
officers, were not as favorable as those under Delaware law. In 1992, Westmark
spun off its wholly owned subsidiary, SpaceLabs Medical, Inc. and changed its
name to that of its other surviving subsidiary, Advanced Technology
Laboratories, Inc. The Company continued to maintain its
14
<PAGE>
Delaware incorporation to obtain the benefits of more up-to-date corporate laws
which have been viewed by the Board of Directors and management as important to
recruiting and retaining directors and officers of the highest caliber who are
essential to the successful operation of the Company. The Company continues to
believe that the highest caliber directors and officers are more readily
attracted to a company existing under up-to-date corporate laws.
While corporations residing in Washington and other states have historically
made similar decisions to utilize the laws of foreign jurisdictions such as
Delaware for their corporate domiciles, the legislatures of other states,
including Washington, have updated their corporation laws. Specifically, the
Washington Legislature amended its corporate law in 1987 to provide limitations
on director liability and to revise statutes relating to indemnification of
directors and officers. Furthermore, in 1989, the Washington Legislature
adopted a comprehensive revision of the WBCA so that, in the Company's opinion,
Washington law is clear and addresses the Company's concerns in these areas at
least on a comparable level as Delaware law.
PLAN OF MERGER
Upon shareholder approval the Company will be merged with and into ATLI
pursuant to the terms of the proposed Agreement and Plan of Merger (the "Merger
Agreement"), a copy of which is attached as Exhibit A to this Proxy Statement.
Upon the completion of the merger, the owner of each outstanding share of
Common Stock of the Company will automatically own one share of ATLI common
stock. Each outstanding certificate representing a share or shares of Company
Common Stock will continue to represent the same number of shares in ATLI
(i.e., a certificate representing one share of Company Common Stock will then
equal one share of ATLI common stock) and the same attendant rights. In
addition, the obligations of ATL with respect to the rights granted to the ATL
shareholders pursuant to the Amended and Restated Rights Agreement of June 26,
1992 will expressly be adopted by ATLI. Thus, IT WILL NOT BE NECESSARY FOR
SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES, and
the Company will incur no cost for the exchange of certificates. The Common
Stock of the Company will continue to be traded on the over-the-counter market
and reported on the Nasdaq National Market under the same ATLI symbol.
The ATLI Articles of Incorporation and Bylaws will be the Articles of
Incorporation and Bylaws of the surviving corporation, except that, upon the
effectiveness of the merger, ATLI's name will be changed to Advanced Technology
Laboratories, Inc. The Articles of Incorporation of ATLI are attached hereto as
Exhibit B. The discussion contained in this Proxy Statement is qualified in its
entirety by reference to Exhibits A and B.
EFFECT OF REINCORPORATION AND MERGER
The Reincorporation and the merger will effect a change in the legal domicile
of the Company and other changes of a legal nature, the most significant of
which are described in this Proxy Statement. However, the Reincorporation and
merger will not result in any change in the name, business, management or
location of the Company's principal executive offices, assets, liabilities, net
worth or accounting practices. Moreover, as noted above, the shares of the
Company's Common Stock will continue to be traded on the over-the-counter
market and reported on the Nasdaq National Market. Options to purchase ATL
Common Stock will become options to purchase ATLI Common Stock without change
in existing terms and conditions. The merger will not give rise to any
appraisal or dissenters' rights.
PRINCIPAL DIFFERENCES IN CORPORATE CHARTERS
The Company's Certificate of Incorporation differs from ATLI's Articles of
Incorporation primarily as to indemnification of officers and directors and
limitations on director liability. Other differences relate to technical
differences between the WBCA and the Delaware General Corporation Law ("DGCL").
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Limitation on Director Liability. Both the WBCA and the DGCL allow charter
documents to eliminate or limit the personal liability of directors; however,
the two statutes prescribe different limitations. In Washington, the Articles
of Incorporation may not eliminate or limit the liability of a director for:
(i) acts or omissions involving intentional misconduct or a knowing violation
of law; (ii) approval of certain distributions or loans contrary to law; or
(iii) any transaction from which the director personally receives a benefit in
money, property or services to which the director is not legally entitled. The
Delaware statute further excludes the limitation of director liability: (i) if
a director has breached the duty of loyalty to the corporation or its
shareholders; or (ii) for acts or omissions not in good faith. In both the ATLI
Articles and the Company's Certificate of Incorporation, these limits on
director liability may not be adversely affected by a repeal or modification of
the applicable law and are automatically amended as authorized by changes in
applicable law so that the liability of a director shall be eliminated or
limited to the fullest extent not prohibited by applicable law. Neither the
DGCL nor the WBCA limits a director's liability for violation of certain
federal laws, including the federal securities laws.
Indemnification of Directors and Officers. Under the Company's current
Certificate of Incorporation and Delaware law, the ability of the Company to
indemnify its directors and officers for payments made in settlement of
derivative actions may be open to certain questions. See "PRINCIPAL REASONS FOR
THE PROPOSED REINCORPORATION." ATLI's Articles of Incorporation provide that
ATLI shall indemnify its directors and officers for expenses and liabilities
incurred by them as a result of their service as directors and officers,
provided that no such indemnification shall be provided on account of: (i) acts
or omissions of the director or officer finally adjudged to be intentional
misconduct or a knowing violation of the law; (ii) approval of certain
distributions or loans contrary to law; or (iii) any transaction with respect
to which the director or officer is finally adjudged to have received a benefit
to which he or she was not legally entitled. See "CERTAIN DIFFERENCES IN
CORPORATE LAWS--Indemnification of Directors and Officers." This comprehensive
language is intended to provide the broadest indemnification of directors and
officers permitted by Washington law, and to authorize indemnification of
directors and officers of amounts paid in settlement of actions brought in the
name of the Company, commonly known as derivative actions.
The Board of Directors believes that the potential personal liability that
can result from derivative actions arising out of an individual's service as a
director or officer of a corporation is a major concern for individuals who are
asked to serve in such positions. The Board of Directors has concluded that by
providing indemnification to the Company's directors and officers for amounts
paid in settlement of derivative actions, subject to the restrictions set forth
in the WBCA, the Company will be able to maintain its ability to recruit and
retain individuals who possess the qualities and experience necessary to serve
as directors and officers of the Company.
Other Differences in the Charter Documents. The ATLI Articles differ in other
technical aspects. Specific articles have been included so as to minimize
differences in corporate governance before and after the Reincorporation.
Preemptive rights and cumulative voting are not provided in the ATLI Articles,
consistent with the rights which presently apply to the Company under the DGCL.
Other articles provide for a majority vote requirement in the case of mergers
(which is the same as the DGCL requirement for mergers), certain limitations on
the right of shareholders to call a special meeting (identical to those in the
Company's current charter), and for maintenance of treasury shares. Various
differences also exist between the ATLI Bylaws and the Company's Bylaws, but
none of these provisions are expected to have a material effect on the
governance of the Company.
CERTAIN DIFFERENCES IN CORPORATE LAWS
The DGCL currently governs the rights of the Company's shareholders. After
the merger, the rights of shareholders shall be governed by the WBCA. The
following discussion summarizes certain significant differences between the
provisions of the DGCL and the WBCA, as applicable to a public company.
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Amendment of Articles/Certificate of Incorporation The WBCA authorizes a
corporation's board of directors to make various changes to its articles of
incorporation including changes of corporate name, of the number of outstanding
shares in order to effectuate a stock split or stock dividend in the
corporation's own shares, and to change or eliminate provisions with respect to
par value of its stock. Other amendments to a corporation's articles of
incorporation must be recommended to the shareholders by the board of
directors, unless the board determines that because of a conflict of interest
or other special circumstances, it should make no recommendations, and must be
approved by a majority of all votes entitled to be cast by each voting group
which has a right to vote on the amendment.
Under the DGCL, amendments to a corporation's certificate of incorporation
require the approval of shareholders holding a majority of the voting power of
the corporation unless a different proportion is specified in the certificate
of incorporation.
Provisions Affecting Acquisitions and Business Combinations. The WBCA imposes
restrictions on certain transactions between a corporation and certain
significant shareholders.
First, subject to certain exceptions, a merger, share exchange, sale of
assets other than in the regular course of business, or dissolution of a
corporation involving an "Interested Shareholder" owning beneficially 20% or
more of the corporation's voting securities must be approved by the holders of
two-thirds of the corporation's outstanding voting securities, other than those
of the Interested Shareholder. This restriction does not apply if the
consideration received as a result of the transaction by noninterested
shareholders is not less than the highest consideration paid by the Interested
Shareholder for shares of the corporation's stock during the preceding two
years or if the transaction is approved by a majority of directors who are not
affiliated with the Interested Shareholder. A Washington corporation may, in
its original articles of incorporation, elect not to be covered by this
provision; however, ATLI has not done so.
Second, Washington law prohibits a "target corporation," with certain
exceptions, from engaging in certain "significant business transactions" with
an "Acquiring Person" who acquires more than 10% or more of the voting
securities of a target corporation for a period of five years after such
acquisition, unless the transaction or acquisition of shares is approved by a
majority of the members of the target corporation's board of directors prior to
the date of the acquisition. The prohibited transactions include, among others,
merger or consolidation with, disposition of assets to, or issuance or
redemption of stock to or from, the Acquiring Person, termination of 5% or more
of the employees of the target corporation as a result of the Acquiring
Person's acquisition of 10% or more of the shares, or allowing the Acquiring
Person to receive any disproportionate benefit as a shareholder. Target
corporations include domestic corporations with their principal executive
offices in Washington and either a majority or over 1,000 of their employees
resident in Washington. Foreign corporations which meet additional requirements
are also subject to the statute. The Company currently meets these standards
and is subject to this statute. A corporation may not "opt out" of this
statute. The statute exempts shares acquired prior to March 23, 1988.
Delaware has enacted a business combination statute that is contained in
Section 203 of the DGCL providing that any person who acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested stockholder") may
not engage in certain "business combinations" with the target corporation for a
period of three years following the date the person became an interested
stockholder, unless (1) the board of directors of the corporation has approved,
prior to that acquisition date, either the business combination or the
transaction that resulted in the person becoming an interested stockholder, (2)
upon consummation of the transaction that resulted in the person becoming an
interested stockholder, that person owns at least 85% of the corporation's
voting stock outstanding, at the time the transaction is commenced (excluding
shares owned by persons who are both directors and officers and shares owned by
employee stock plans in which participants do not have the right to determine
confidentially whether shares will be tendered in a tender or exchange offer),
or (3) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 66% of the outstanding voting stock not owned by
the interested stockholder.
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These restrictions placed on interested shareholders by Section 203 do not
apply under certain circumstances, including, but not limited to, the
following: (1) if the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by Section 203 or
(2) if the corporation, by action of its shareholders, adopts an amendment to
its bylaws or certificate of incorporation expressly electing not to be
governed by Section 203, provided that such an amendment is approved by the
affirmative vote of not less than a majority of the outstanding shares entitled
to vote and that such an amendment will not be effective until 12 months after
its adoption and will not apply to any business combination with a person who
became an interested stockholder at or prior to such adoption. The Company has
not elected to take itself outside of the coverage of Section 203.
The Company believes that the difference between these two statutes are not
material as they apply to the Company. Also, as discussed above, the Company is
presently subject to the WBCA statute.
Mergers, Acquisitions and Other Transactions. Under the WBCA, a merger,
consolidation, sale of substantially all of a corporation's assets other than
in the regular course of business, or dissolution of a public corporation must
be approved by the affirmative vote of a majority of directors when a quorum is
present, and by two-thirds of all votes entitled to be cast by each voting
group entitled to vote as a separate group, unless another proportion is
specified in the articles of incorporation. ATLI's Articles of Incorporation
provide that the corporate transactions specified above may be approved by a
majority of the outstanding shares entitled to vote. Under the DGCL, a merger,
consolidation or sale of all or substantially all of a corporation's assets
other than in the regular course of business or dissolution of a corporation
must be approved by a majority of the outstanding shares entitled to vote.
Action Without a Meeting. Under the WBCA, shareholder action may be taken
without a meeting if written consents setting forth such action are signed by
all holders of outstanding shares entitled to vote thereon.
The DGCL authorizes shareholder action without a meeting if consents are
received from holders of a majority of the outstanding shares. However, the
Company's Certificate of Incorporation only permits actions without a meeting
by consent of all holders of outstanding shares.
Class Voting. Under the WBCA, the articles of incorporation may authorize one
or more classes of shares that have special, conditional, or limited voting
rights, including the right to vote on certain matters as a group. The articles
of incorporation may not limit the rights of holders of a class to vote as a
group with respect to certain amendments to the articles of incorporation and
certain mergers that adversely affect the rights of holders of that class.
The DGCL requires voting by separate classes only with respect to amendments
to the certificate of incorporation that adversely affect the holders of those
classes or that increase or decrease the aggregate number of authorized shares
or the par value of the shares of any of those classes.
Transactions With Officers or Directors. The WBCA sets forth a safe harbor
for transactions between a corporation and one or more of its directors. A
conflicting interest transaction may not be enjoined, set aside or give rise to
damages if: (i) it is approved by a majority of qualified directors; (ii) it is
approved by the affirmative vote of all qualified shares; or (iii) at the time
of commitment, the transaction was fair to the corporation. For purposes of
this provision, "qualified director" is one who does not have: (a) a
conflicting interest respecting the transaction, or (b) a familial, financial,
professional, or employment relationship with a second director which
relationship would reasonably be expected to exert an influence on the first
director's judgment when voting on the transaction. "Qualified shares" are
defined generally as shares other than those beneficially owned, or the voting
of which is controlled, by a director who has a conflicting interest respecting
the transaction.
The DGCL provides that contracts or transactions between a corporation and
one or more of its officers or directors or an entity in which they have an
interest is not void or voidable solely because of such interest
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or the participation of the director or officer in a meeting of the board or a
committee which authorizes the contract or transaction if: (i) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the board or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of disinterested directors; (ii) the material
facts as to the relationship or interest and as to the contract or transaction
are disclosed or are known to the shareholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by a vote of
the shareholders; or (iii) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved, or ratified, by the
board of directors, a committee thereof, or the shareholders.
Appraisal or Dissenter's Rights. Under the WBCA, a shareholder is entitled to
dissent from and, upon perfection of his or her appraisal right, to obtain fair
value of his or her shares in the event of certain corporate actions, including
certain mergers, share exchanges, sales of substantially all assets of the
corporation, and amendments to the corporation's articles of incorporation that
reduce the number of shares owned by a shareholder to a fraction of a share.
Under the DGCL, appraisal rights are available only in connection with
certain mergers or consolidations, unless otherwise provided in the
corporation's certificate of incorporation. Even in the event of those mergers
or consolidations, unless the certificate of incorporation otherwise provides,
the DGCL does not provide appraisal rights (i) if the shares of the corporation
are listed on a national securities exchange or national market system, or held
of record by more than 2,000 shareholders (as long as in the merger the
shareholders receive shares of the surviving corporation or any other
corporation the shares of which are listed on a national securities exchange or
national market system, or held of record by more than 2,000 shareholders) or
(ii) if the corporation is the surviving corporation and no vote of its
shareholders is required for the merger. The Company presently has over 2,000
shareholders of record and its shares are traded on a national market system,
and shareholders therefore would presently not have statutory appraisal rights
under the DGCL in such mergers.
Indemnification of Directors and Officers. Under the WBCA, if authorized by
the articles of incorporation, a bylaw adopted or ratified by shareholders, or
a resolution adopted or ratified, before or after the event, by the
shareholders, a corporation has the power to indemnify a director or officer
made a party to a proceeding, or advance or reimburse expenses incurred in a
proceeding, under any circumstances, except that no such indemnification shall
be allowed on account of: (i) acts or omissions of a director or officer
finally adjudged to be intentional misconduct or a knowing violation of the
law; (ii) conduct of a director or officer finally adjudged to be an unlawful
distribution; or (iii) any transaction with respect to which it was finally
adjudged that such director or officer personally received a benefit in money,
property or services to which the director or officer was not legally entitled.
Written commentary by the drafters of the WBCA, which has the status of
legislative history, specifically indicates that a corporation may indemnify
its directors and officers for amounts paid in settlement of derivative
actions, provided that the director's or officer's conduct does not fall within
one of the categories set forth above. The ATLI Articles provide that ATLI
shall indemnify its directors and officers to the fullest extent permitted by
law, including indemnification for payments in settlement of actions brought
against a director or officer in a derivative action. See "Principal
Differences in Corporate Charters--Indemnification of Directors and Officers."
Under the DGCL, indemnification of directors and officers is authorized to
cover judgments, amounts paid in settlement, and expenses arising out of non-
derivative actions where the director or officer acted in good faith and in or
not opposed to the best interests of the corporation. Additionally, under the
DGCL, a corporation may reimburse directors and officers for expenses incurred
in a derivative action. While the DGCL provides that these indemnification
provisions are not exclusive, which, in the Company's opinion, indicates that a
corporation may provide for broader indemnification in its charter documents
including circumstances not specifically authorized under the DGCL, there is
some uncertainty as to the extent to which a corporation may indemnify its
directors and officers for judgments and amounts paid in settlement of
derivative actions. There are no definitive decisions and this uncertainty
exists because certain legal
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commentators have argued that such indemnification would be circular and is
against public policy. Also, a proposal to permit such indemnification was
specifically rejected by the General Corporation Law Section of the Delaware
Bar Association.
The Company has included undertakings in various registration statements
filed with the Securities and Exchange Commission that, in the event a claim
for indemnification is asserted by a director or officer relating to
liabilities under the Securities Act of 1933, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
indemnification would be against public policy and will be governed by any
final adjudication of such issue.
TAX CONSEQUENCES
The Reincorporation will, in the opinion of Cravath, Swaine & Moore, be a tax
free reorganization under the Code. Accordingly, no gain or loss will be
recognized for federal income tax purposes by the shareholders of the Company
as a result of the merger, and the tax basis and holding period for the stock
of ATLI received by the shareholders of the Company in exchange for the
Company's stock will be the same as the tax basis and holding period of the
stock of the Company deemed to be exchanged therefor. The Reincorporation will
have no federal income tax effect on the Company or ATLI, or ATL's
shareholders.
VOTE REQUIRED AND BOARD RECOMMENDATION
Delaware law requires the favorable vote of at least a majority of all of the
outstanding stock of the Company to approve the Reincorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
REINCORPORATION FROM DELAWARE TO WASHINGTON. ALL SHAREHOLDERS WILL CONTINUE TO
HOLD THEIR CURRENT WESTMARK OR ATL STOCK CERTIFICATES AS PROOF OF STOCK
OWNERSHIP, AND THE COMPANY'S COMMON STOCK WILL CONTINUE TO BE TRADED ON THE
NASDAQ NATIONAL MARKET.
PROPOSAL 3: AMENDMENT TO NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Nonemployee Director Stock Option Plan. The Company's Nonemployee Director
Stock Option Plan (the "NED Plan") provides for the automatic annual grant of
an option to purchase shares of Common Stock to each nonemployee Director of
the Company. At the Annual Meeting, the shareholders of the Company will be
asked to approve an amendment to the NED Plan, which, if approved, will
increase the number of shares covered by each such option grant from 2,000 to
5,000 shares of Common Stock. This amendment does not alter or increase the NED
Plan's authorization of 50,000 shares. The purpose of the proposed amendment is
to provide incentives that management believes are necessary in order to
attract and retain highly qualified and experienced outside Directors, and to
provide nonemployee Directors with incentives that are closely aligned with
shareholder interests and value.
The NED Plan covers Directors of the Company who are not otherwise employed
by the Company or any parent or subsidiary corporation, each of whom
automatically receives the grant of an option under the NED Plan on July 1 of
each year in which he serves as a Director. As of the date of this Proxy
Statement, the Company has five nonemployee Directors. Assuming that each of
such persons is re-elected as a Director of the Company at the Annual Meeting
and continues to serve as a Director on July 1, 1995, each of Messrs. Cramer,
Feigenbaum, Miller, Nudelman and Woolf will be entitled to receive grants under
the NED Plan.
DESCRIPTION OF THE NED PLAN.
The NED Plan authorizes a total of 50,000 shares of Common Stock that may be
subject to option grants, subject to certain adjustments for reclassifications,
reorganizations and similar corporate transactions.
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Under the NED Plan, each nonemployee Director automatically receives the
grant of an option with an exercise price equal to the fair market value of the
number of shares of Common Stock covered by the option on the date of grant.
Options are exercisable and become fully vested and nonforfeitable on the first
anniversary of grant, assuming that the optionee continues to serve as a
Director on such anniversary. Options expire on the fifth anniversary of grant,
subject to earlier termination in the event an optionee ceases to be a Director
of the Company.
The NED Plan is administered by the Board of Directors, which may amend,
terminate or suspend the NED Plan in certain limited respects; provided,
however, that if required to qualify the NED Plan under SEC Rule 16b-3, no
amendment may be made more than once every six months that would change the
amount, price, timing or vesting of Options, other than to comport with changes
in the Internal Revenue Code of 1986, as amended, or the rules and regulations
promulgated thereunder. If required to qualify the NED Plan under Rule 16b-3,
no amendment may be made without approval by the Company's shareholders that
would (a) materially increase the number of shares of Common Stock that may be
issued under the NED Plan, (b) materially modify the requirements as to
eligibility for participation in the NED Plan, or (c) otherwise materially
increase the benefits accruing to participants under the NED Plan.
As of the date of this Proxy Statement, Messrs. Cramer, Feigenbaum, Miller,
Nudelman and Woolf are entitled to grants under the NED Plan. As of March 20,
1995 the closing price of ATL Common Stock as reported on the Nasdaq National
Market was $15.00.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
The following description addresses the federal income tax consequences of
the NED Plan, a non-qualified stock option plan. Although the Company believes
the following statements are correct based on existing provisions of the Code
and the legislative history and administrative and judicial interpretations
thereof, no assurance can be given that changes will not occur which would
modify such statements Also, such statements are intended only to provide basic
information. Each NED Plan participant should consult his or her own tax
advisor concerning tax consequences of the grant, exercise or surrender of an
option because individual financial and federal tax situations may vary, and
state and local tax considerations may be significant.
No taxable income is recognized by holders of non-qualified options upon the
grant of options. However, upon exercise, the optionee must recognize taxable
ordinary income in an amount equal to the difference between fair market value
of the shares on the date of exercise and the option price. Thus, the optionee
will have to pay taxes at the time a non-qualified option is exercised even if
the shares received upon exercise are not sold until a later taxable year. The
fair market value of the shares on the date of exercise then becomes the tax
basis of the shares. Capital gain or loss will generally be realized on the
difference between the amount realized on sale and the basis of the shares.
This capital gain or loss will be short-term or long-term depending upon how
long the shares were held by the optionee prior to sale. Different tax
consequences may result when an optionee is considered an insider under Section
16(b) of the Exchange Act.
The Company will be entitled to a deduction at the same time and in the same
amount as the ordinary taxable income recognized by each option holder,
provided the compensation paid is reasonable and otherwise deductible under the
Code, and federal income tax withholding obligations are satisfied.
Those members of the Board of Directors who are not outside Directors and are
not beneficiaries under the NED Plan have unanimously approved the amendment to
the Nonemployee Director Stock Option Plan and recommend a vote "FOR" approval
of Proposal 3.
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PROPOSAL 4: RATIFICATION OF APPOINTMENT OF AUDITORS
Unless instructed to the contrary, it is intended that votes be cast pursuant
to the accompanying proxy for the ratification of the appointment of KPMG Peat
Marwick LLP as independent auditors of the Company for the year 1995. KPMG Peat
Marwick LLP has audited the accounts of the Company and Westmark and its major
subsidiaries from 1987 through 1994, and since 1982 for the units of Squibb
that now comprise ATL. Representatives of KPMG Peat Marwick LLP are expected to
attend the meeting and will have an opportunity to make a statement and/or to
respond to appropriate questions from stockholders.
In the event this ratification of the appointment of auditors is not made by
a majority of the shares present in person or by proxy and entitled to vote
thereon, the selection of other auditors will be considered and determined by
the Board of Directors.
The Board of Directors has unanimously approved the appointment of KPMG Peat
Marwick LLP as auditors for the Company and its major subsidiaries for 1995 and
recommends a vote "FOR" approval of Proposal 4.
EXPENSES OF SOLICITATION
The accompanying proxy is solicited by and on behalf of the Board whose
notice of meeting is attached to this Proxy Statement, and the entire cost of
such solicitation will be borne by the Company. Georgeson & Co., New York, New
York, will distribute proxy materials to beneficial owners and solicit proxies
by personal interview, mail, telephone and telegram, and will request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
material to the beneficial owners of the Common Stock held on the record date
by such persons. The Company will pay Georgeson & Co. a fee of $6,500.00
covering its services and will reimburse Georgeson & Co. for payments made to
brokers and other nominees for its expenses in forwarding soliciting material.
Solicitation by personal interview, telephone and telegram by Directors,
officers and other employees of ATL will be without special compensation.
OTHER MATTERS
The Company knows of no other matters which are likely to be brought before
the meeting. If, however, other matters not now known or determined come before
the meeting, the persons named in the enclosed proxy or their substitutes will
vote such proxy in accordance with their judgment in such matters.
PROPOSALS OF SHAREHOLDERS
In order for proposals of shareholders to be considered for inclusion in the
Proxy Statement and proxy for the 1996 Annual General Meeting of Shareholders,
said proposals must be received by the Secretary of ATL by December 4, 1995.
ANNUAL REPORT AND FORM 10-K
A copy of the Company's 1994 Annual Report is being mailed with this Proxy
Statement to each shareholder of record. Shareholders not receiving a copy of
the Annual Report to Shareholders may obtain one without charge by writing or
calling Corporate and Investor Relations, 22100 Bothell Everett Highway, P.O.
Box 3003, Bothell, WA 98041-3003, (206) 487-7000.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as filed with the Securities and Exchange Commission, will
be provided without charge to each shareholder of record who submits a written
request therefor addressed to ATL Corporate and Investor Relations, 22100
Bothell Everett Highway, P.O. Box 3003, Bothell, WA 98041-3003, (206) 487-7000.
By order of the Board of Directors
/s/ W. Brinton Yorks, Jr.
W. Brinton Yorks, Jr.
Secretary and General Counsel
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EXHIBIT A
PLAN AND AGREEMENT OF MERGER
BETWEEN
ATLI WASHINGTON CORPORATION
AND
ADVANCED TECHNOLOGY LABORATORIES, INC.
This Plan and Agreement of Merger (this "Agreement") is entered into this
10th day of May, 1995, by and between ATLI Washington Corporation, a Washington
corporation (the "Surviving Corporation"), and Advanced Technology
Laboratories, Inc., a Delaware corporation ("ATL Delaware"). The Surviving
Corporation and ATL Delaware are sometimes referred to jointly as the
"Constituent Corporations."
RECITALS
A. Each of the Constituent Corporations is a corporation organized and
existing under the laws of the respective states as indicated in the first
paragraph of this Agreement.
B. The shareholders and directors of each of the Constituent Corporations
have deemed it advisable for the mutual benefit of the Constituent Corporations
and their respective shareholders that ATL Delaware be merged into the
Surviving Corporation pursuant to the provisions of the Washington Business
Corporation Act, Title 23B of the Revised Code of Washington and the Delaware
General Corporation Law (the "Merger").
Now, Therefore, in accordance with the laws of the states of Washington and
Delaware, the Constituent Corporations agree that, subject to the following
terms and conditions, (i) ATL Delaware shall be merged into the Surviving
Corporation, (ii) the Surviving Corporation shall continue to be governed by
the laws of the state of Washington, and (iii) the terms of the Merger, and the
mode of carrying them into effect, shall be as follows:
ARTICLE I
Articles of Surviving Corporation
The Articles of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time of the Merger shall constitute the
"Articles" of the Surviving Corporation within the meaning of Section
23B.01.400(1) of the Washington Business Corporation Act and Section 104 of the
Delaware General Corporation Law, except that Article I of the Articles of
Incorporation of the Surviving Corporation is hereby amended in its entirety to
read as follows:
ARTICLE I
Name
The name of the corporation is Advanced Technology Laboratories, Inc.
ARTICLE II
Appointment of Agent for Service of Process
Pursuant to Section 252(d) of the Delaware General Corporation Law, the
Surviving Corporation irrevocably appoints the Secretary of State of Delaware
to accept service of process in any proceeding to enforce against the Surviving
Corporation any obligation of any Constituent Corporation as well as for
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enforcement of any obligation of the Surviving Corporation arising from the
merger. The Delaware Secretary of State shall mail a copy of such process to
ATL Delaware Corporation, Attn.: Legal Department, 22100 Bothell Everett
Highway, P.O. Box 3003, Bothell, WA 98041-3003
ARTICLE III
Conversion of Shares
3.1 ATL Delaware Shares. At the Effective Time of the Merger each outstanding
share of the common stock of ATL Delaware shall by operation of the Merger and
without any action by the shareholders automatically convert to one share of
the Surviving Corporation. It will not be necessary for shareholders of ATL
Delaware to exchange their existing stock certificates for stock certificates
of the Surviving Corporation.
3.2 Stock Options. At the Effective Time of the Merger, the Surviving
Corporation shall automatically assume all of the obligations under any and all
of ATL Delaware's outstanding option agreements to acquire common stock of ATL
Delaware, and the outstanding and unexercised portions of all such stock
options and rights to purchase ATL Delaware common stock thereunder shall
become options or rights to purchase an identical number of shares of the
Surviving Corporation's common stock, all upon the same terms and conditions as
in effect at the Effective Time.
3.3 Surviving Corporation Shares. At the Effective Time of the Merger each
outstanding share of the common stock of the Surviving Corporation shall by
operation of the Merger and without any action by the shareholders be
automatically canceled and returned to the status of authorized but unissued
shares.
3.4 Share Purchase Rights. Each share purchase right issued under the Amended
and Restated Rights Agreement dates as of June 26, 1992, between ATL Delaware
and First Chicago Trust Company of New York, as Rights Agent ("Rights
Agreement"), and which has not been exercised or redeemed immediately prior to
the Effective Time, shall, by operation of the Merger and without any action on
the part of the holder thereof, be converted into and become a share purchase
right exercisable upon the same terms and subject to the same conditions as set
forth in the Rights Agreement as though the Rights Agreement were entered into
by the Surviving Corporation in all respects in lieu of ATL Delaware. The
Surviving Corporation hereby assumes all obligations of ATL Delaware under the
Rights Agreement, including the share purchase rights issued thereunder, and
all such obligations may be enforced against the Surviving Corporation as if
the Rights Agreement had been contracted by the Surviving Corporation and such
share purchase rights had been issued by the Surviving Corporation.
3.5 Other Employee Benefit Plans. As of the Effective Time, the Surviving
Corporation hereby assumes all obligations under any and all employee benefit
plans of ATL Delaware in effect as of the Effective Time or with respect to
which employee rights accrued benefits are outstanding as of the Effective
Time.
ARTICLE IV
Bylaws
The Bylaws of the Surviving Corporation shall be the governing Bylaws.
ARTICLE V
Directors and Officers
The directors and officers of ATL Delaware shall be the directors and
officers of the Surviving Corporation.
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ARTICLE VI
Effect of the Merger
The effect of the Merger shall be as provided by the applicable provisions of
the laws of Washington and Delaware. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time of the Merger: the
separate existence of ATL Delaware shall cease; the Surviving Corporation shall
possess all assets and property of every description, and every interest
therein, wherever located, and the rights, privileges, immunities, powers,
franchises, and authority, of a public as well as a private nature, of all of
the Constituent Corporations; all obligations belonging to or due any of the
Constituent Corporations shall be vested in and become the obligations of, the
Surviving Corporation without further act or deed; title to any real estate or
any interest therein shall not revert or in any way be impaired by reason of
the Merger; all rights of creditors and all liens upon any property of any of
the Constituent Corporations shall be preserved unimpaired; and the Surviving
Corporation shall be liable for all the obligations of the Constituent
Corporations and any claim existing, or action or proceeding pending, by or
against any of the Constituent Corporations may be prosecuted to judgment with
right of appeal, as if the Merger had not taken place.
If at any time after the Effective Time of the Merger the Surviving
Corporation shall consider it to be advisable that any further conveyances,
agreements, documents, instruments, and assurances of law or any other things
are necessary or desirable to vest, perfect, confirm, or record in the
Surviving Corporation the title to any property, rights, privileges, powers and
franchises of the Constituent Corporations or otherwise to carry out the
provisions of this Agreement, the proper directors and officers of the
Constituent Corporations last in office shall execute and deliver, upon the
Surviving Corporation's request, any and all proper conveyances, agreements,
documents, instruments, and assurances of law, and do all things necessary or
proper to vest, perfect, or confirm title to such property, rights privileges,
powers, and title to such property, rights, privileges, powers, and franchises
in the Surviving Corporation, and otherwise to carry out the provisions of this
Agreement.
ARTICLE VII
Effective Time of the Merger
As used in this Agreement, the "Effective Time of the Merger" shall mean the
time at which executed counterparts of this Agreement or conformed copies
thereof, together with duly executed Certificates or Articles of Merger have
been duly filed by the Constituent Corporations in the office of the Washington
Secretary of State pursuant to Section 23B.11.050 of the Washington Business
Corporation Act and the Office of the Delaware Secretary of State pursuant to
Section 252 of the Delaware General Corporation Law or at such time thereafter
as is provided in such Certificate or Articles of Merger.
ARTICLE VIII
Termination and Amendment
8.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, prior to the Effective Time of the Merger, either party to
this Agreement may withdraw from this Agreement and may abandon the Merger:
(a) Upon written notice to the other party hereto; or
(b) If the holders of the outstanding shares of common stock of ATL
Delaware or the Surviving Corporation shall not vote in favor of the Merger
by at least the number of votes required by RCW 23B.11.030 or (S)251 of the
Delaware General Corporation Law; or
(c) If there exists a suit, action or other proceeding commenced, pending
or threatened against the Constituent Corporations, before any court or
other governmental agency or federal or state government, in which it is
sought to restrain, prohibit or otherwise adversely affect the consummation
of the Merger.
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8.2 Amendment. Anything contained in this Agreement notwithstanding, this
Agreement may be amended or modified in writing at any time prior to the
Effective Time of the Merger; provided that, an amendment made subsequent to
the adoption of this Agreement by the shareholders of the parties shall not (1)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of the Constituent Corporations, (2)
alter or change the terms of the Articles of Incorporation of the Surviving
Corporation or (3) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of
shares of any class or series thereof of the Constituent Corporations; provided
however, the Constituent Corporations may by agreement in writing extend the
time for performance of, or waive compliance with, the conditions or agreements
set forth herein.
8.3 Board Action. In exercising their rights under this Article VIII, each of
the Constituent Corporations may act by its Board of Directors, and such rights
may be exercised, notwithstanding the prior approval of the Agreement by the
shareholders of the Constituent Corporations.
ARTICLE IX
No Third Party Beneficiaries
Except as otherwise specifically provided herein, nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm, or corporation, other than the Constituent Corporations
and their respective shareholders, any rights or remedies under or by reason of
this Agreement.
In Witness Whereof, the parties hereto have caused this Plan and Agreement of
Merger to be executed as of the date first above written.
Advanced Technology Laboratories,
Inc.
A Delaware Corporation
By __________________________________
Dennis C. Fill, Chairman
ATTEST:
- ------------------------------------------
W. Brinton Yorks, Secretary
ATLI Washington Corporation
By __________________________________
Dennis C. Fill, Chairman
ATTEST:
- ------------------------------------------
W. Brinton Yorks, Secretary
A-4
<PAGE>
EXHIBIT B
ARTICLES OF INCORPORATION
OF
ATLI WASHINGTON CORPORATION
ARTICLE I
Name
The name of the corporation (the "Corporation") is
ATLI WASHINGTON CORPORATION
ARTICLE II
Registered Office and Agent
The address of the Corporation's registered office in the State of Washington
is 520 Pike Street, 26th Floor, Seattle, Washington 98101. The name of the
Corporation's registered agent at such address is The Corporation Trust
Company.
ARTICLE III
Shares
3.1 AUTHORIZED CAPITAL
The total number of shares of stock which the Corporation shall have
authority to issue is 56,000,000 shares, of which 50,000,000 shares shall be
shares of Common Stock, par value $0.01 per share ("Common Stock"), and
6,000,000 shares shall be shares of Preferred Stock, with the par value of
$25.00 per share ("Preferred Stock"). Unless otherwise provided for pursuant to
the authority granted in Section 3.2, no shareholder of the Corporation shall
have any preemptive right to acquire additional shares of stock or securities
convertible into shares of stock of the Corporation.
3.2. PROVISIONS RELATING TO PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article III, to provide for the issuance of the
shares of Preferred Stock in series and by filing a certificate pursuant to the
applicable law of the State of Washington, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such class or
series and the qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(i) the number of shares constituting that series and the distinctive
designation of that series;
(ii) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(iii) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion privileges, including provision
for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the
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<PAGE>
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(vii) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series; and
(viii) any other relative rights, preferences and limitations of that
series.
3.3. PROVISIONS RELATING TO COMMON STOCK
(i) Subject to the provisions of Section 3.2 of this Article III, holders of
Common Stock shall be entitled to receive such dividends as may be declared
thereon from time to time by the Board of Directors in its discretion from any
assets legally available for the payment of dividends.
(ii) In the event of the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, after distribution to the
holders of all shares of Preferred Stock which shall be entitled to a
preference over the holders of Common Stock of the full preferential amounts to
which the holders of Preferred Stock are entitled, the holders of Common Stock
shall be entitled to share ratably in the distribution of the assets of the
Corporation or the proceeds thereof.
(iii) Except as herein otherwise expressly provided and as otherwise required
by law, all shares of Common Stock shall have equal voting rights and the
holders of such shares shall have one vote, in person or by proxy, for each
share thereof held.
ARTICLE IV
Special Meeting of Shareholders
Except as otherwise required by law and subject to the rights of the holders
of the Preferred Stock or any other class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of shareholders of the Corporation may be called only by holders of
two-thirds or more of the voting power of the then outstanding shares of stock
of all classes and series of the Corporation entitled to vote generally in the
election of Directors ("Voting Stock"), by the Corporation's Chairman of the
Board, by its President or by the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors or as otherwise
provided in the Bylaws of the Corporation.
ARTICLE V
Limitation of Director Liability
5.1 LIMITATION OF LIABILITY
To the fullest extent permitted by the Washington Business Corporation Act
(the "Act"), as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its shareholders for
conduct as a director. Any amendments to or repeal of this Article V shall not
adversely affect any right or protection of a director for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
5.2 RESTRICTION ON AMENDMENT
In addition to any requirements of law and any other provisions herein or in
the terms of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation (and not
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<PAGE>
withstanding that a lesser percentage may be specified by law), the affirmative
vote of the holders of two-thirds or more of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, alter or repeal any provision of this Article V.
ARTICLE VI
Indemnifcation of Directors, Officers, Employees and Agents
1. The Corporation shall have the following powers:
(a) The Corporation may indemnify and hold harmless to the fullest extent
not prohibited by applicable law each person who was or is made a party to
or is threatened to be made a party to or is involved (including, without
limitation, as a witness) in any actual or threatened action, suit or other
proceeding, whether civil, criminal, derivative, administrative or
investigative, by reason of that fact that he or she is or was a director,
officer, employee or agent of the Corporation or, being or having been such
a director, officer, employee or agent of the Corporation, he or she is or
was serving at the request of the Corporation as a director, officer,
employee, agent, trustee, or in any other capacity of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis of such
proceeding is alleged action or omission in an official capacity or in any
other capacity while serving as a director, officer, employee, agent
trustee or in any other capacity, against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts to be paid in settlement) actually or
reasonably incurred or suffered by such person in connection therewith.
Such indemnification may continue as to a person who has ceased to be a
director, officer, employee or agent of the Corporation and shall inure to
the benefit of his or her heirs and personal representatives.
(b) The Corporation may pay expenses incurred in defending any such
proceeding in advance of the final disposition of any such proceeding;
provided, however, that the payment of such expenses in advance of the
final disposition of a proceeding shall be made to or on behalf of a
director, officer, employee or agent only upon delivery to the Corporation
of an undertaking, by or on behalf of such director, officer, employee or
agent, to repay all amounts so advanced if it shall ultimately be
determined that such director, officer, employee or agent is not entitled
to be indemnified under this Article VI or otherwise, which undertaking may
be unsecured and may be accepted without reference to financial ability to
make repayment.
(c) The Corporation may enter into contracts with any person who is or
was a director, officer, employee and agent of the Corporation in
furtherance of the provisions of this Article VI and may create a trust
fund, grant a security interest in property of the Corporation, or use
other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect indemnification
as provided in this Article VI.
(d) If the Act is amended in the future to expand or increase the power
of the Corporation to indemnify, to pay expenses in advance of final
disposition, to enter into contracts, or to expend or increase any similar
or related power, then, without any further requirement of action by the
shareholders or directors of the Corporation, the powers described in this
Article VI shall be expanded and increased to the fullest extent permitted
by the Act, as so amended.
(e) No indemnification shall be provided under this Article VI to any
such person if the Corporation is prohibited by the nonexclusive provisions
of the Act or other applicable law as then in effect from paying such
indemnification. For example, no indemnification shall be provided to any
director in respect of any proceeding, whether or not involving action in
his or her official capacity, in which he or she shall have been finally
adjudged to be liable on the basis of intentional misconduct or knowing
violation of law by the director, or from conduct of the director in
violation of Section 23B.08.310 of the Act, or that the director personally
received a benefit in money, property or services to which the director was
not legally entitled.
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<PAGE>
2. The Corporation shall indemnify and hold harmless any person who is or was
a director or officer of the Corporation, and pay expenses in advance of final
disposition of a proceeding, to the full extent to which the Corporation is
empowered.
3. The Corporation may, by action of its Board of Directors from time to
time, indemnify and hold harmless any person who is or was an employee or agent
of the Corporation, and pay expenses in advance of final disposition of a
proceeding, to the full extent to which the Corporation is empowered, or to a
lesser extent which the Board of Directors may determine.
4. The rights to indemnification and payment of expenses in advance of final
disposition of a proceeding conferred by or pursuant to this Article VI shall
be contract rights.
5. A director, officer, employee or agent ("claimant") shall be presumed to
be entitled to indemnification and/or payment of expenses under this Article VI
upon submission of a written claim (and, in an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition, where the undertaking in subsection 1(b) above has been delivered
to the Corporation) and thereafter the Corporation shall have the burden of
proof to overcome the presumption that the claimant is so entitled.
If a claim under this Article is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for expenses incurred in defending a proceeding
in advance of its final disposition, in which case the applicable period shall
be twenty (20) days, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. Neither the failure of the Corporation
(including its board of directors, its shareholders or independent legal
counsel) to have made a determination prior to the commencement of such action
that indemnification of or reimbursement or advancement of expenses to the
claimant is proper in the circumstances nor an actual determination by the
Corporation (including its board of directors, its shareholders or independent
legal counsel) that the claimant is not entitled to indemnification or to the
reimbursement or advancement of expenses shall be a defense to the action or
create a presumption that the claimant is not so entitled.
6. The right to indemnification and payment of expenses in advance of final
disposition of a proceeding conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
7. The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee, agent or trustee of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Act.
8. Any repeal or modification of this Article VI shall not adversely affect
any right of any person existing at the time of such repeal or modification.
9. If any provision of this Article VI or any application thereof shall be
invalid, unenforceable or contrary to applicable law, the remainder of this
Article VI, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, unenforceable or contrary to
applicable law, shall not be affected thereby and shall continue in full force
and effect.
10. For the purposes of this Article VI, "applicable law" shall at all times
be construed as the applicable law in effect at the date indemnification may be
sought, or the law in effect at the date of the action, omission or other event
giving rise to the situation for which indemnification may be sought, whichever
is selected by the person seeking indemnification. As of the date hereof,
applicable law shall include Section 23B.08.500 through .600 of the Act.
B-4
<PAGE>
ARTICLE VII
Directors and Officers
7.1 NUMBER OF DIRECTORS
The number of directors of the Corporation shall be specified in the Bylaws,
and such number may from time to time be increased or decreased in such manner
as may be prescribed in the Bylaws. The officers of the Corporation shall be
appointed in such manner as described in the Bylaws.
7.2 ELECTION OF DIRECTORS
Unless otherwise provided for pursuant to the authority granted in Section
3.2 of Article III hereof, shareholders of the Corporation shall not have the
right to cumulative votes in the election of directors.
ARTICLE VIII
Mergers, Share Exchanges and other Transactions
Except as otherwise expressly provided in these Articles of Incorporation, a
merger, share exchange, sale of substantially all of the Corporation's assets
other than in the regular course of business, or dissolution must be approved
by the affirmative vote of a majority of the Corporation's outstanding shares
entitled to vote, or if separate voting by voting groups is required, then by
not less than a majority of all the votes entitled to be cast by that voting
group.
ARTICLE IX
Corporation's Acquisition of own Shares
The Corporation may purchase, redeem receive, take or otherwise acquire, own
and hold, sell, lend, exchange, transfer or otherwise dispose pledge, use and
otherwise deal with and in its own shares. As a specific modification of
Section 23B.06.310 of the Act, pursuant to the authority in Section
23B.02.020(5)(c) of the Act to include provisions related to the management of
the business and the regulation of the affairs of the Corporation, shares of
the Corporation's stock acquired by it shall be considered "Treasury Stock" and
so held by the Corporation. The shares so acquired by the Corporation shall not
be considered as authorized but unissued but rather authorized, issued and held
by the Corporation but not outstanding. The shares so acquired shall not be
regarded as canceled or as a reduction to the authorized capital of the
Corporation unless specifically so designated by the Board of Directors in an
amendment to these Articles of Incorporation. The provisions of this Article IX
do not alter or affect the status of the Corporation's acquisition of its
shares as a "distribution" by the Corporation as defined in Section
23B.01.400(6) of the Act nor alter or affect the limitations of distributions
by the Corporation set forth in Section 23B.06.400 of the Act. Any shares so
acquired the Corporation, unless specifically designated by the Board of
Directors, at the time of acquisition, shall be considered on subsequent
disposition as transferred rather than reissued. Nothing in this Article XI
limits or restricts the right of the Corporation to resell or otherwise dispose
of any of its shares previously acquired for such consideration and according
to such procedures as established by the Board of Directors.
ARTICLE X
Incorporation
The name and address of the incorporator are: W. Brinton Yorks, Jr., 22100
Bothell Everett Highway, Bothell, Washington 98041-3003.
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<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned appoints DENNIS C. FILL, KIRBY L. CRAMER and HARRY WOOLF,
Ph.D., or any one of them, Proxies with full power of substitution, to
vote the shares of Advanced Technology Laboratories, Inc. which the
undersigned is entitled to vote at the Annual General Meeting of
R Shareholders of Advanced Technology Laboratories, Inc., to be held on
Wednesday, May 10, 1995, at 9:30 a.m. at the Four Seasons Olympic Hotel,
411 University Street, Seattle, Washington, and at any adjournment
thereof, on the matters set forth on the reverse side.
O
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND A SPACE FOR YOUR
VOTE AND SIGNATURE ARE SET FORTH ON THE REVERSE SIDE.
X
If this Proxy relates to shares held for the undersigned in the Advanced
Technology Laboratories, Inc. Incentive Savings and Stock Ownership Plan
or the SpaceLabs Medical, Inc. Incentive Savings and Stock Ownership
Y Plan, then when properly executed, it shall constitute instructions to
the plan's trustees to vote in the manner directed herein.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. ---------------
| SEE REVERSE |
| SIDE |
---------------
________________________________________________________________________________
----- Please mark your |
| X | votes as in this |
----- example |
--------
THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S); IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4, AND IN THE
DISCRETION OF THE PROXIES UPON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE MEETING.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4:
- --------------------------------------------------------------------------------
FOR WITHHELD
----- -----
1. Election of Directors | | | |
----- -----
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
Nominees: Kirby L. Cramer, Harvey Felgenbaum, Dennis C. Fill, Eugene A. Larson,
John R. Miller, Philip N. Nudelman, David M. Perozek, Edward Ray and
Harry Woolf.
FOR AGAINST ABSTAIN
2. REINCORPORATION IN STATE OF WASHINGTON. ----- ----- -----
Approve a change in the Corporation's | | | | | |
state of incorporation from Delaware to ----- ----- -----
Washington by way of a merger into a
wholly-owned Washington subsidiary.
3. AMENDMENT TO NONEMPL0YEE DIRECTOR STOCK ----- ----- -----
OPTION PLAN. Approve an amendment to | | | | | |
increase the annual option grant to 5,000 ----- ----- -----
shares.
4. RATIFICATION OF AUDITORS. Ratification ----- ----- -----
of the appointment of KPMG Peat Marwick | | | | | |
as independent auditors for the year ----- ----- -----
ending December 31, 1995.
SIGNATURE(S) _______________________________________DATE ______________________
Please date and sign your name(s) exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as it appears hereon. Second signature if stock jointly held.
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
AMENDED NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE I PURPOSES
The purposes of the Advanced Technology Laboratories, Inc. Stock Option
Plan for Nonemployee Directors (the "Plan") are to attract and retain the
services of experienced and knowledgeable nonemployee directors of Advanced
Technology Laboratories, Inc. (the "Corporation") and to provide an incentive
for such directors to increase their proprietary interests in the Corporation's
long-term success and progress.
ARTICLE II SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Article VI hereof, the total
number of shares of the Corporation's common stock, $.0l par value per share
(the "Common Stock"), for which options may be granted under the Plan is 50,000
(the "Shares"). The Shares shall be shares presently authorized but unissued or
subsequently acquired by the Corporation and shall include shares representing
the unexercised portion of any option granted under the Plan which expires or
terminates without being exercised in full.
ARTICLE III ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the Board
of Directors of the Corporation (the "Board"). Subject to the terms of the
Plan, the Plan Administrator shall have the power to construe the provisions of
the Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable. No member of the Plan Administrator shall participate in any vote by
the Plan Administrator on any matter materially affecting the rights of any such
member under the Plan.
ARTICLE IV PARTICIPATION IN THE PLAN
Each member of the Board elected or appointed who is not otherwise an
employee of the Corporation or any parent or subsidiary corporation (an
"Eligible Director") shall automatically receive the grant of an option
to purchase 5,000 Shares on the first day of July in each year that the Eligible
Director serves.
ARTICLE V OPTION TERMS
Each option granted to an Eligible Director under the Plan and the issuance
of Shares thereunder shall be subject to the following terms:
1. Option Agreement
Each option granted under the Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Corporation. Each
Agreement shall comply with and be subject to the terms and conditions of the
Plan. Any Agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Plan Administrator.
2. Option Exercise Price
The option exercise price for an option granted under the Plan shall be the
fair market value of the Shares covered by the option at the time the option is
granted. For purposes of the Plan, "fair market value" shall be the average of
the high and low sales prices at which the Common Stock was sold on such date
<PAGE>
as reported by the NASDAQ National Market System on such date or, if no Common
Stock was traded on such date, on the next preceding date on which Common Stock
was so traded.
3. Vesting and Exercisability
An option shall become fully vested and become nonforfeitable on July 1 of
the year following the year in which the option was granted if the optionee has
continued to serve as a Director until such date.
4. Time and Manner of Exercise of Option
Each option may be exercised in whole or in part at any time and from time
to time; provided, however, that no fewer than 100 Shares (or the remaining
Shares then purchasable under the option, if less than 100 Shares) may be
purchased upon any exercise of option rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Corporation stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in full
for such Shares, which payment may be in whole or in part (i) in cash or by
check or (ii) in shares of Common Stock already owned for at least three (3)
months by the person exercising the option, valued at fair market value at the
time of such exercise.
5. Term of Options
Each option shall expire five (5) years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
(a) In the event that an optionee ceases to be a director of the
Corporation for any reason other than the death of the optionee, the
options granted to such optionee may be exercised by him or her only within
one (1) year after the date such optionee ceases to be a director of the
Corporation.
(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the one (1) year period referred
to in Section 5 (a), the options granted to such optionee shall be
exercisable, and such options shall expire unless exercised within one (1)
year after the date of the optionee's death, by the legal representatives
or the estate of such optionee, by any person or persons whom the optionee
shall have designated in writing on forms prescribed by and filed with the
Corporation or, if no such designation has been made, by the person or
persons to whom the optionee's rights have passed by will or the laws of
descent and distribution.
6. Transferability
During an optionee's lifetime, an option may be exercised only by the
optionee. Options granted under the Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution except that, to the extent
permitted by applicable law and Rule 16b-3 promulgated under Section 16(b) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan
Administrator may permit a recipient of an option to designate in writing
during the optionee's lifetime a beneficiary to receive and exercise options in
the event of the optionee's death (as provided in Section 5(b)). Any attempt
to transfer, assign, pledge, hypothecate or otherwise dispose of any option
under the Plan or of any right or privilege conferred thereby, contrary to the
provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, shall be null and
void.
7. Participant's or Successor's Rights as Stockholder
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
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Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares.
8. Limitation as to Directorship
Neither the Plan nor the granting of an option nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express on implied, that an optionee has a right to continue as
a director for any period of time or at any particular rate of compensation.
9. Regulatory Approval and Compliance
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by
the Plan Administrator, and without complying, to the Plan Administrator's
complete satisfaction, with all rules and regulations under federal, state or
local law deemed applicable by the Plan Administrator.
ARTICLE VI CAPITAL ADJUSTMENTS
The aggregate number and class of Shares for which options may be granted under
the Plan, the number and class of Shares covered by each automatic grant and
each outstanding option and the exercise price per Share thereof (but not the
total price) shall all be proportionately adjusted for any stock dividends,
stock splits, recapitalizations, combinations or exchanges of shares, split-ups,
split-offs, spinoffs, or other similar changes in capitalization. Upon the
effective date of a dissolution or liquidation of the Corporation with one or
more corporations which results in more than eighty percent of the outstanding
voting shares of the Corporation being owned by one or more affiliated
corporations or other affiliated entities, or of a transfer of all or
substantially all the assets or more than eighty percent of the then outstanding
shares of the Corporation to another corporation or other entity, this Plan and
all options granted hereunder shall terminate. In the event of such
dissolution, liquidation, reorganization, merger, consolidation, transfer of
assets or transfer of stock, each optionee shall be entitled, for a period of
twenty days prior to the effective date of such transaction, to purchase the
full number of shares under his or her option which he or she is otherwise would
have been entitled to purchase during the remaining term of such option.
Adjustments under this Article IV shall be made by the Plan Administrator,
whose determination shall be final. In the event of any adjustment in the
number of Shares covered by any option, any fractional Shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full Shares resulting from such adjustment.
ARTICLE VII EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation; none of such expenses shall be charged to any
optionee.
ARTICLE VIII EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective on May 5, 1993. The Plan shall continue in
effect until it is terminated by action of the Board or the
Corporation's stockholders, but such termination shall not affect the
then-outstanding terms of any options.
ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that if required to qualify the Plan
under Rule 16b-3 promulgated under Section 16(b) of the Exchange Act, no
amendment may be made more than once every six (6) months that would change the
amount, price, timing or vesting of the options, other than to comport with
changes in the Internal Revenue Code of 1986, as amended, or the rules and
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regulations promulgated thereunder; and provided, further, that if required to
qualify the Plan under Rule 16b-3, no amendment that would
(a) materially increase the number of Shares that may be issued
under the Plan,
(b) materially modify the requirements as to eligibility for
participation in the Plan, or
(c) otherwise materially increase the benefits accruing to
participants under the Plan shall be made without the approval
of the Corporation's stockholders.
ARTICLE X COMPLIANCE WITH RULE 16b-3
It is the intention of the Corporation that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
Plan participants remain disinterested persons ("disinterested persons") for
purposes of administering other employee benefit plans of the Corporation and
having such other plans be exempt from Section 16 (b) of the Exchange Act.
Therefore, if any Plan provision is later found not to be in compliance with
Rule 16b-3 or if any Plan provision would disqualify Plan participants from
remaining disinterested persons, that provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.
Adopted by the Corporation's Board of Directors on February 26, 1993 and
approved by the Corporation's stockholders and effective on May 5, 1993.
Amended and approved by the Corporation's Directors and Stockholders effective
on May 10, 1995.
